Mortgage Rate Calculators

Mortgage Rate Calculator Basics

The most basic mortgage rate calculator will take the amount you intend to spend on a home and the likely interest rate you will pay to calculate how much your Mortgage Payments would be. You may be surprised at how much of a home you can afford for the same amount of a monthly payment as you now pay in rent. Depending on the real estate market in your area, you could feasibly purchase twice as much square footage for the same or less money. The best part is instead of spending your money on rent, you will be investing into a property that is likely to appreciate in value.

Of course, unless you are sitting down with a mortgage officer who has analyzed your credit report and the appraiser's report on the home, this number is arbitrary, but it is a good starting place for deciding whether you might be financially capable of handling a mortgage at this stage in your life.

Refinancing Calculators

Refinancing mortgage rate calculators are a bit more sophisticated. They take the information about your current mortgage, including the interest rate, principal, and how long you intend to stay in your home to compare it to what you might save on your monthly payments over the life of the loan if you were to refinance your mortgage at a lower interest rate.

These calculators may also do the math for you when you want to refinance for more than the principal balance of your current loan. Say, for example, you know your home will appraise for at least $100,000 but you only owe the bank $75,000 on your current mortgage loan. Your initial mortgage was contracted at six percent interest for 30 years, and your current monthly principal and interest payment is around $600 a month. What you want to know is if you refinanced at five percent, drawing out $20,000 in cash to pay off unsecured debts, how much your payments would be on a 15-year note. A calculator would quickly come up with your new payment of $751, which is significantly less than the $1,000 a month you now may spend on mortgage plus credit card payments. In this case, it may be a wise financial move to refinance your home.

How Much Home Can You Afford

Other mortgage rate calculators are designed to do much of the work a lender would do. You will input your outstanding monthly payments on unsecured debts and car payments. You will then enter your monthly take-home pay and an estimate of what your credit rating is. It is a good idea to know how long you are willing to carry a mortgage on a new home and how much of a down payment you can come up with without borrowing from friends, family, or other sources. From these numbers, the calculator will estimate the maximum home price you may qualify to purchase and what your monthly payments would be.

This approach to looking for a home can save you a lot of time because it narrows down your search to homes that are within your price range.

In Conclusion

Mortgage rate calculators can simplify your decision-making process by giving you a general idea of how your finances may be viewed by a lender. While no one can guarantee the interest rate you will qualify for until you have visited a mortgage professional, calculators can at least get you in the right ballpark. And remember, when looking for a mortgage, shop around. Each lender has different qualifying criteria, and their rates and fees are apt to vary as well.