Show Monthly payment: What’s behind the numbers used in our mortgage payment calculator?The NerdWallet mortgage payment calculator cooks in all the costs that are wrapped into your monthly payment, including principal and interest, taxes and insurance. You’ll just need to plug in the numbers. The more info you’re able to provide, the more accurate your total monthly payment estimate will be. For example, you may have homeowners association dues built into your monthly payment. Or mortgage insurance, if you put down less than 20%. And then there’s property taxes and homeowners insurance. It helps to gather all of these additional expenses that are included in your monthly payment, because they can really add up. If you don’t consider them all, you may budget for one payment, only to find out that it’s much larger than you expected. For you home gamers, here’s how we calculate your monthly mortgage payments on a fixed-rate loan: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] The variables are:
Interest: The difference 15 years can makeThe longer the term of your loan — say 30 years instead of 15 — the lower your monthly payment but the more interest you’ll pay. Say you’ve decided to buy a home that’s appraised at $500,000, so you take out a $400,000 loan with an interest rate of 3.5%. First, let’s take a look at a 30-year loan. For quick reference, again, the formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] Our P, or principal, is $400,000. Remember, with i, we must take the annual interest rate given to us — 3.5%, or 0.035 — and divide by 12, the number of months in a year. This calculation leaves us with 0.002917, or i. Our n, again, is the number of payments. And with one payment every month for 30 years, we multiply 30 by 12 to find n = 360. When all’s said and done, for a 30-year loan at 3.5% interest, we’ll pay $1,796.18 each month. For a 15-year loan, the math is nearly identical. All that’s different is the value of n. Our loan is half the length, and so the value for n is 180. Each month we’ll pay $2,859.53, over 60% more than with the 30-year loan. Over the length of the loan, though, the 15-year loan is a far better deal, considering the interest you pay — $514,715 in total. With the 30-year, you pay $646,624 total — over $100,000 more. Your decision between these two, quite simply, hinges on whether or not you can float the significantly higher monthly payments for a 15-year loan. Comparing common loan typesNerdWallet’s mortgage payment calculator makes it easy to compare common loan types to see how each type of loan affects your monthly payment. We source the latest weekly national average interest rate from Zillow, so you can accurately estimate and compare your monthly payment for a 30-year fixed, 15-year fixed, and 5/1 ARM. To pick the right mortgage, you should consider the following: How long do you plan to stay in your home? How much financial risk can you accept? How much money do you need? 15- or 30-year fixed rate loan: If you’re settled in your career, have a growing family and are ready to set down some roots, this might be your best bet because the interest rate on a fixed-rate loan never changes. In general, for a 30-year fixed loan, you will have the lowest monthly payment but the highest interest rate. However, with a 15-year fixed, you’ll have a higher payment, but will pay less interest and build equity and pay off the loan faster. If other fees are rolled into your monthly mortgage payment, such as annual property taxes or homeowners association dues, there may be some fluctuation over time. 5/1 ARM and adjustable-rate mortgages: These most often appeal to younger, more mobile buyers who plan to stay in their homes for just a few years or refinance when the teaser rate is about to end. These loans have interest rates that reset at specific intervals. They typically begin with lower interest rates than fixed-rate loans, sometimes called teaser rates. After the initial term ends, the interest rate — and your monthly payment — increases or decreases annually based on an index, plus a margin. Paying a lower interest rate in those initial years could save hundreds of dollars each month that could fund other investments. But be careful. Your interest rate and monthly payment will increase after the introductory period, which can be three, five, seven or even 10 years, and can climb substantially depending on the terms of your loan. What are my monthly costs for owning a home?There are five key components in play when you calculate mortgage payments
In addition to the monthly costs addressed in our mortgage payment calculator, keep in mind that there are other upfront costs in addition to your down payment. These costs include property and loan related fees, insurance and title fees. Find out more about mortgage closing costs Can I lower my monthly payment?There are a few ways to lower your monthly payment. Our mortgage payment calculator can help you understand if one of them will work for you:
Look for a lower interest rate. You can think about refinancing (if you already have a loan) or shop around for other loan offers to make sure you’re getting the lowest interest rate possible. Can my monthly payment go up?Your monthly payment can rise in a few cases:
|