How to Calculate Monthly Mortgage Payments

Purchasing real estate is very in-depth process —as it should be since purchasing a home is one of the largest investment some people will ever make. When deciding how to calculate your monthly mortgage payment it is important to first understand how much house you can actually afford each month. Lending institutions have made the loan process for home buying much more accommodating for those who have little to no money for down payments, not so great credit and other financial situations which could possibly prohibit them from qualifying for a home loan. With so many lending options available for people to obtain loans it is vital to know what you are committing to when considering a home mortgage loan, if you should default on your loan obligations the banks will probably not be so accommodating to assist you. Knowing how to calculate your monthly mortgage will give you an idea of how to plan for your monthly mortgage payments and budget your finances accordingly.

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Step 1

Use a home mortgage payment calculator. These calculators are available online free of charge.

Step 2

Enter the mortgage amount, which is the purchase price of the home into the calculator.

Step 3

Determine your desired loan term, for example, you may want to pay the home off in 10 years or 25 years, enter the number applicable to your prepayment goals.

Step 4

Enter the interest rate. If you have not locked in a set interest rate, then it is a good idea to play around with the interest rate in the calculator by adjusting it from 6% to 8%— this helps you to see how much interest rates affect the overall mortgage payments. The lower the interest rate the lower the monthly mortgage payment and the higher the interest rate the more the monthly mortgage payment will be.

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Step 5

Press the calculate button now if you do not know the annual property taxes or insurance information for the home of the property you desire to purchase. If you have this additional information, complete the next steps.

Step 6

Enter the annual property taxes if you have obtained this information from your realtor. You will be responsible for taxes on your home so it is a good idea to add this information into your monthly mortgage payments to prevent any unexpected expenses during tax season.

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Step 7

Enter the annual home insurance information if you have received a quote from your insurance company. Adding the tax and insurance information into the calculator helps you get a realistic idea of what your financial obligations will be. When calculating your monthly mortgage payments without considering annual property taxes or annual home insurance the calculator will calculate a lower monthly payment since this information was not entered.

Step 8

Keep in mind that mortgage calculators give an estimated monthly mortgage payment based on the information you provide. For the most accurate estimated monthly mortgage payments enter the accurate information and include as much relevant information as possible, such as the annual property taxes and annual insurance information.

Tip

Set up a mortgage savings account for possible economic changes. Be sure to fully understand the financial obligations that come with a mortgage. Get a financial assessment.

Warning

Never purchase a home without fully understanding the risks and responsibilities that are tied to the home loan. Never obtain a mortgage loan that is beyond your financial ability to repay.

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