When considering purchasing a home, one of the most crucial tools at your disposal is a mortgage calculator. Bankrate’s Mortgage Calculator is a comprehensive tool designed to help you make informed decisions about your home purchase. Here’s a step-by-step guide on how to use it and what benefits it offers.
Step 1: Enter Your Home Price
Start by inputting the price of the home you are considering. This is the total amount you will need to finance, excluding any down payment you plan to make[1][2][4].
Step 2: Enter Your Down Payment
Next, enter the amount of your down payment. You can input this as a dollar amount or a percentage of the home price. For example, if you are putting down 20% on a $300,000 home, you would enter $60,000 or 20%. The down payment amount significantly affects your monthly mortgage payments and the total interest you will pay over the life of the loan[1][2].
Step 3: Enter Your Loan Term
Specify the length of your loan, which is typically 30 years but can also be 20, 15, or 10 years. The loan term directly impacts your monthly payments and the total interest paid. Shorter loan terms usually result in higher monthly payments but less total interest over the life of the loan[1][2].
Step 4: Enter Your Interest Rate
Input the interest rate you expect to pay or are currently paying. Bankrate’s calculator defaults to the current average rate, but you can adjust this based on your specific situation. The interest rate is a critical factor in determining your monthly payments and total cost of the loan[1][2].
Step 5: Enter Your ZIP Code
Enter your ZIP code to help the calculator estimate property taxes and homeowners insurance, which are often location-specific. You can adjust these estimates if you have more accurate information[1].
Step 6: Review Your Results
After entering all the necessary information, click “Update” to see your results. The calculator will provide you with your total monthly mortgage payment, including principal, interest, property taxes, and homeowners insurance. It will also give you an amortization schedule and estimates of how much you will pay in total interest over the life of the loan[1].
Using the Calculator to Make Financial Decisions
Assessing Affordability
Use the calculator to determine if you are stretching your homebuying budget too far. It helps you see how much you’ll pay each month, including homeowners insurance premiums and property taxes, which is crucial for evaluating your debt-to-income (DTI) ratio[1].
Comparing Loan Terms
The calculator allows you to compare the monthly payments and total interest between different loan terms (e.g., 10, 15, 20, or 30 years). This can help you decide whether a shorter-term loan, with its lower interest rates but higher monthly payments, is right for you[1].
Evaluating Down Payment Scenarios
You can use the calculator to weigh different down payment scenarios. A larger down payment reduces the amount you need to borrow, resulting in lower monthly payments and less interest paid over the life of the loan. It also might qualify you for lower interest rates and reduce or eliminate mortgage insurance premiums[1][2].
Considering Early Mortgage Payoff
The calculator’s amortization schedule can help you understand how extra payments can impact your loan. You can see how making additional payments can reduce the total interest paid and shorten the loan term[1].
Determining When to Remove Mortgage Insurance
For conventional loans, the calculator can help you determine when you will reach 20% equity, the threshold for requesting the removal of private mortgage insurance (PMI)[1].
Most Important Facts About the Bankrate Mortgage Calculator
Home Price and Down Payment: Enter the home price and your down payment amount to calculate your monthly mortgage payments and total interest[1][2].
Loan Term: Choose from various loan terms (10, 15, 20, or 30 years) to see how it affects your monthly payments and total interest[1][2].
Interest Rate: Input your expected interest rate, which significantly impacts your monthly payments and total cost[1][2].
ZIP Code: Enter your ZIP code to estimate property taxes and homeowners insurance[1].
Monthly Payments: The calculator provides a detailed breakdown of your monthly payments, including principal, interest, taxes, and insurance[1].
Amortization Schedule: Use the amortization schedule to see how your payments are allocated over the life of the loan and to plan for early payoff or PMI removal[1].
Comparative Analysis: Compare different loan terms, down payments, and interest rates to make informed financial decisions[1][2].
By using the Bankrate Mortgage Calculator, you can make more informed decisions about your home purchase, ensuring you are well-prepared for the financial commitments involved.
