# How Mortgage Calculators Work

Mortgage calculators are tools that allow you to estimate your monthly payments on a fixed rate mortgage, calculate your total cost of borrowing and even give you an approximation of the size of mortgage that you can afford.

A basic mortgage calculator will take the sale price of the home, the size of the down payment, the length or term of the mortgage and the annual interest rate to come up with an estimation of your monthly payments.

Private Mortgage Insurance Calculator

A good mortgage calculator will also include the cost of private mortgage insurance (PMI) for down payments that are less than 20% of the sale cost.

For example, a basic mortgage calculator may calculate a \$200,000 mortgage with \$20,000 down and an interest rate of 6.5% amortized over 30 years as having a monthly payment of \$1137. However, a mortgage calculator that includes the estimated \$100 per month for private mortgage insurance (payable until the 20% down on the total capital is reached) will give you a better approximation of your monthly payments.

Property Tax Calculator

An even better mortgage payment calculator will ask about property taxes in your area. Typically, the mortgage calculator will ask you for the property’s prior tax rate. From there, it’ll calculate an estimated basic increase in property tax values and give you an approximation of your expected monthly payments. Remember, a \$200,000 home can expect to pay around \$2000 a year in property taxes; that’s an extra \$166 a month.

Extra Payment Calculator

An extra payment calculator lets you input your expected mortgage payments along with an estimated additional monthly or yearly payment. In turn, it’ll tell you how that amount affects the final date your mortgage is paid off.

For example, as stated earlier, a \$180,000 30-year mortgage with a 6.5% interest rate will have monthly payments of approximately \$1137. If the mortgage starts on Jan 01, 2009, the estimated pay-off date is Jan 01, 2039.

An extra payment calculator will show you that adding just \$50 per month to your payments will push your mortgage end date up to 2035 (that’s 4 years earlier), and adding \$100 each month will bring it up to 2032 (that’s 7 years earlier).

The Problem with Mortgage Calculators

Unfortunately, mortgage calculators don’t always reflect the truth of sometimes fluctuating interest rates, early payment penalties, and the longer terms on refinancing mortgages.

While a mortgage calculator can give you useful estimates, it’s always best to speak directly with a lender or mortgage professional to gain a clear and accurate idea of your exact monthly mortgage costs.

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