Mortgage calculator is a simple tool that helps you estimate the cost of your mortgage. Thinking about buying your first property? Wondering whether you can afford it? After you put in just a few digits our mortgage calculator will tell you what your monthly payment and total payments will be. Be advised that the calculator provides you with just an illustration and does not include all the details and costs the banks charge when giving a loan. To know in detail how to calculate mortgage payment check out the mortgage payment formula section below.
In order to understand it you need to familiarize yourself with some basic terms:
Now that you know the basics we can get to our calculation.
Remember that this is just an estimation. When taking a mortgage you need to think about other costs which the banks charge themselves or require. This is particularly important in case of long term mortgages combined with low down payment. These are some of the more common charges:
If you would like to know how to calculate mortgage payment on your own, the equation is:
**To calculate your monthly interest rate simply divide the annual interest rate by 12.
Let's do an example calculation. To do that we need to know: the principal amount, monthly interest rate, loan period/number of payments. You can find this information in your mortgage loan agreement. For our purpose, we will assume following numbers:
Now, we can get on with the calculation:
To make it easier, we will add 1 to the "r"
In the next step we have to raise the "(1+r)" (in our example 1,004) to the power of "n" (in our example 240). It is best to use a calculator (put in the value to be raised, than press the xy button and enter the "n" value, press "=") or an excel sheet (use the POWER function: =power(number to be raised,power). The number in our case is: 2,607. Now our equation would look like this:
Let's simplify again and multiply the "r" times the result of raising to power (the top value) and subtract "1" from the result of raising to power on the bottom:
All that is left to do now is to divide the numerator by the denominator...
...and there you go: your monthly payment is 649,03. If you want to know what the total sum of all your payments will amount to, just multiply your monthly payment (MP) by the number of months you will pay your loan (n). In our example it would be:
When you know what your total payments will be, you can also calculate how much you will pay the bank for loaning you money. Just subtract your principal from your total payments. In our case the costs of our loan would amount to 55 767,2 EUR.
You can also forget about all this long counting and use our mortgage calculator.
While choosing a mortgage there are more things to consider than interest rate and fees. You also need to decide what type of mortgage you want. There are of course many variations but the main two types are:
A peace of mind is the biggest advantage of the fixed rate mortgage. You can be sure that your rate will stay the same and plan your expenses with more accuracy. Keep in mind however, that fixed rates are usually a bit higher than variable ones. And, if the rates fall, you won't benefit from it.
The advantages of variable rate mortgages lie in its flexibility - when the base rate falls, your interest falls as well, if you want to overpay and get out early, you can. Ironically flexibility is also their main disadvantage - if the base rate goes up, so does your interest, thus it is more difficult to plan your expenses and you need to remember to have some extra money should the rate go up.
Balloon payment mortgage is a special kind of mortgage where you are left with a large payment at the end of the loan. This means that the mortgage does not fully amortize over its lifespan. Balloon payment is always higher than monthly payments. . Balloon mortgages can have fixed or variable rates. Due to high risk for small owners balloon loans are more common in commercial real estate. An average homeowner could find it difficult to repay the balance due at loan's maturity. However, there are ways to overcome this difficulty. Some borrowers simply plan to sell their house before the balloon payment is due, others plan to refinance their loan when the balloon payment is due. If you decide to do this, the lender will convert your remaining balance into a traditional fully amortized loan. There are balloon mortgages which refinance the remaining balance automatically - they are called "two-step" mortgages. If you are considering a balloon loan, check our balloon payment calculator to help you estimate how much it will cost you.