# Home Mortgage Calculator

Created by Tibor Pál, PhD candidate
Reviewed by Dominik Czernia, PhD and Jack Bowater
Last updated: Jan 15, 2023

Use the home mortgage calculator or, in other words, the home loan mortgage calculator to reveal the monthly payment on a mortgage and answer the question "How much monthly mortgage can I afford?".

Moreover, the home mortgage amortization schedule and the dynamic chart gives you an excellent way to check the division of interest and principal payments and to see how your balances progress.

If you want to conduct a more detailed mortgage analysis, you may find our mortgage calculator with extra payments useful as well. Also, if you are shopping around mortgages, check our mortgage comparison calculator, which will give you excellent support in your decision-making.

## How much monthly mortgage can I afford?

When you are about to turn to a bank to take a home mortgage, the most crucial thing you need to consider is how you will afford the monthly payments.

The monthly payment depends not only on the size of the home mortgage, but also on the loan term
and the interest rate or APR given in your housing mortgage contract. The monthly payment alone, however, doesn't provide sufficient information to answer the question of "How much mortgage payment can I afford". To answer this question better, you need to place the monthly mortgage cost in the context of your income.

This indicator is the DTI ratio that banks apply to support their decision regarding the amount of money you can borrow. More specifically, the DTI ratio for mortgage is the total monthly debts to your monthly pre-tax income expressed as a percentage. Typically, an acceptable DTI ratio is no more than 28 per cent, which means that your total monthly debt doesn't exceed 28 per cent of your monthly income. For example, if your monthly mortgage payment is 500 dollars a month and you have a monthly income of 2000 dollars before taxes, your DTI is 500 / 2000 = 0.25 = 25%.

## Types of mortgage loans

Because of the large size and sophisticated structure of the mortgage sector in the US economy, home mortgages can take numerous forms depending on their design, for example, their provider, size, interest rate and amortization structure. In the following, we introduce the main types of mortgage loans without going into detail, but, if you would like to learn more on this topic, you may check our mortgage calculator.

1. Conventional mortgages

The federal government does not insure these loans, which can take two forms: conforming and non-conforming loans. Conforming loans have maximum limits set by Fannie Mae or Freddie Mac. Other home loans, for example, jumbo loans, which don't meet these guidelines, are non-conforming.

2. Government-insured mortgages

Government-insured home loans help you finance a home when you don't qualify for a conventional loan. While their credit requirements are more relaxed and the down payment is typically lower, the overall borrowing costs are higher.

3. Fixed-rate mortgages

These loans keep the same interest rate over the loan term, which means your monthly mortgage payment won't fluctuate but will stay the same.

Interest rates of [adjustable-rate mortgages ARMs are not fixed, which means that they can go up or down depending on market conditions. For example, at 10/1 ARM mortgages, the bank guarantees a fixed interest rate for the first ten years of the loan.

5. Other types of home loans:

• Construction loans - Designed for building a home;
• Interest-only mortgages - The borrower pays only the interest on the loan for a set period; and
• Balloon mortgages - Requires a large payment at the end of the loan term.

## How to use the home mortgage calculator?

Specifications

• Mortgage amount - The amount of loan under consideration, which constitutes the principal part of the total payment.
• Loan term - The interval over which you are obliged to repay the loan amount.
• Interest rate - This typically refers to the quoted annual rate of interest, one of the most relevant factors you need to consider when taking a home loan.
• Monthly income - Your monthly pre-tax income is required to determine the DTI ratio. The higher the ratio, the higher your monthly debt relative to your income. From your side, a higher ratio indicates greater difficulty in financing your debt, and, from the side of the credit provider, it signals elevated risk.
• Compounding frequency (advanced mode) - The way the lender computes interest on the principal. The lender may calculate interest annually (m = 1) or quarterly (m = 4). Still, the general practice is that banks compound monthly (m = 12). This means that they determine interest in the outstanding principal on a specified day each month.
• Extra monthly payment (advanced mode) - With this option, you can increase the computed monthly payment by a given amount and see its effect on your results.

Payment summary

After setting all the specifications, the results appear instantaneously. You can find your DTI ratio, the necessary monthly payment to pay off the loan in the given loan term, the total payment amount, and the charged interest.

Moreover, you can follow your balances and payments through different graphs: a chart of the payment schedule or an amortization table.

## Disclaimer

You should consider the home mortgage calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.

For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.

Tibor Pál, PhD candidate
Specifications
Mortgage amount
$Loan term yrs Interest rate % Monthly income$
Payment summary
Your debt to income ratio (DTI) is 27%, which doesn't exceed the recommended 28% rate, suggesting that you can safely manage the monthly payments.
The fixed monthly payment is $405.35. The total payment amount is$145,925.37, with an interest payment of \$65,925.37.
Display
Chart of balances
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