My free mortgage calculator is very easy to use. I’m going to walk you through a few simple steps that will give you the basic knowledge that you need before buying a home, and things to do while you already have a mortgage.
Before you get your mortgage
There’s a lot of research I like to do before even looking for a home. I like to figure out exactly what I can afford, and what the bank will allow me to borrow before finding the home of my dreams. They decide this based on your Debt to Income Ratio (click for definition). Go to the Mortgage Calculator home page and click on the “Borrowing Power” mortgage calculator at the bottom. Fill in the necessary information and it will tell you how much you can afford for a monthly payment. Make sure to include ALL expenses because the goal is to live happy and comfortably. So I added a “Monthly Safety Buffer” which will make sure you don’t come within a certain amount of your income. Once you’ve filled out the information you can see the average interest rates and how much of a mortgage payment you’d be able to afford.
Now that you know how much borrowing power you have, you can decide on the type of home that best fits your interest! The bank has a different calculation that they use to tell you how much you can borrow. They still use a mortgage calculator but use a different debt to income ratio than you should. They could just ask you what your bills are, but some people would lie to get a bigger mortgage, so they came up with their own calculation which is basically no more than 45% of your gross income. Example: Income - $5000.00/mo - you can afford $2250.00 (Mortgage payment, Taxes and Insurance combined). This may be more or less than the number you came up with, but no one knows what you can afford better than YOU. If you get in over your head it could be a nightmare, so be careful and honest to yourself about what you can afford for your own monthly mortgage payment.
Already have a mortgage
I know that it’s a lot of work to get a mortgage and when you finally get in your new home you feel relieved and think that it’s over. IT’S NOT! It’s just begun in my eyes. Go to the Mortgage Calculator home page again and click on the 2nd calculator called “Extra Repayments”. Let’s say you just got a mortgage for $100,000.00 at 6% over 30 years. Plug that in to the mortgage calculator and you’ll see that over the next 30 years you will pay over $115,000.00 just in interest! So, now type $20.00 into the “Extra Repayment Amount” and you will see how much interest you save by adding ONLY $20.00 per month to your principal payment. Can you believe that it’s $11,465.00? Sounds hard to believe, but it’s true! It also has the ability to tell you that you’ll save 42 months worth of payments!
Let’s see it from another angle - What if I offered you the option to NOT make 42 monthly mortgage payments over the course of your 30 year mortgage by simply increasing your mortgage payment by $20.00? Of course you would take it! You’d be saving a lot of money! So how do you come up with an extra $20.00 per month? EASY! I have a page on my site dedicated to coming up with small amounts of money each month so you can add it to your mortgage and save thousands!
