What a mortgage calculator can and can't do
As you聽consider buying a home or refinancing your mortgage, it鈥檚 likely you鈥檒l eventually look for a mortgage calculator online. As with anything else, there are tons聽of search results. And as usual, only a handful are relevant or even useful.
We jumped into the deep end of those results, and here鈥檚 what we found.
Making the best use of a mortgage calculator
Some mortgage calculators are super-simple. Google鈥檚 is right at the top of the search results and is a typical Google tool: clean, easy to use and quick. Enter the home price, and mortgage term in years, and bam! Here鈥檚 your monthly payment. That鈥檚 OK for a high-level view of things. You may look at the resulting number, find it higher than you expected, groan and mutter, 鈥淵eah, back to Facebook.鈥�
But if the number seems doable, drill down a bit to get a better, more realistic number. That鈥檚 when you鈥檒l look for a that does a bit more. You want a聽calculator that allows you to estimate expenses that will likely figure聽into your monthly payment.
Most mortgage payments go beyond just principal and interest payments and include such outlays聽as property taxes, homeowners insurance and even homeowners association dues. There can also be monthly mortgage insurance if your down payment is less than 20%. Those costs can really add up, and including them in your calculations gives you a much better idea of what you鈥檒l actually pay.
So now you鈥檙e getting a real-life look at the costs of homeownership. But it鈥檚 still just in the ballpark. Once you get deep into the mortgage loan process, you鈥檒l see聽just how many variables there can聽be. Your interest rate could go聽up or down, for instance聽鈥斅爉aybe just a little, but still different than what you counted on.聽And you鈥檒l have to shop for your to really nail down the cost.
So run a bunch of different numbers. Aim high on the cost estimates on one pass, low on another, until you get a good聽range of possibilities.
What a mortgage calculator can do
- A mortgage calculator can only estimate the monthly payment you鈥檒l make. It will base聽that聽on the information you provide 鈥斅爋r on what it can approximate, using somebody鈥檚 best guess.
- It can give you a starting point聽in the 鈥溾�� conversation.
- It might persuade聽you to put more money down.
- It might motivate you to negotiate for a better interest rate.
What a mortgage calculator cannot do
- It can鈥檛 tell聽you exactly聽what your monthly payment will be. There are too many variables, and things change during the buying process.
- It can鈥檛 give you the exact amount of additional expenses that will聽be built into your monthly payment. Only the lender can do that.
- It can鈥檛 tell you 鈥斅爀ven if the monthly payment looks good to you 鈥� whether聽you can actually afford to buy a house. For that, you鈥檒l need a real-life 鈥渉ow much house can I afford?鈥� calculator.
- It can鈥檛 tell you if you鈥檒l qualify for the interest rate you plugged into the calculator.
- It can鈥檛 tell you if you鈥檒l get the rate you want with the down payment you鈥檝e saved.
- It certainly can鈥檛 tell you if you鈥檒l be able to find a house in the price range you鈥檝e used.
- And it can鈥檛 tell you .
Next steps
If all of this calculating has gotten you fired up to buy a home, you may want to take it even further. Remember, a mortgage calculator can tell you only so much. Want to know if you鈥檒l qualify for a loan? You鈥檒l have to determine your debt-to-income ratio, and see how much money you鈥檝e got in the bank.
Or better yet, go talk to a lender or two and see what they think.
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Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: . This article first appeared in .
