If you are planning on applying for a mortgage to purchase a new home but would like to estimate just about what the monthly payment would be for a certain amount, here are a few tips that will help you out.
Know the difference between estimate and calculation
While you can estimate an approximate monthly mortgage payment by using just a pen, pencil and a hand calculator, you should know that actually calculating the exact monthly payment involves complicated math. There are dedicated financial calculators out there, but if you don’t want to use one, and you also don’t know how to use the financial functions in a spreadsheet, you can still get a reasonably accurate estimate which should give you an idea about what expenses you can expect when taking out a mortgage.
Do the math
Estimating your monthly mortgage payment with a hand calculator is pretty straightforward. First, you need to see how much a monthly interest rate would be, and in order to find out, just divide the mortgage interest rate by 12. As an example, for a 6 percent interest mortgage, the monthly interest rate would be 0.5 percent.
Now you need to multiply the total amount of the loan by the monthly interest rate. So if you have taken a $300,000 loan, the interest rate each month would amount to $1,500. Write down the number of thousands you have in the loan. In the case of $300,000, then the number of thousands is 300.
Next you need to add the number of thousands to the monthly interest rate. So you have $1,500 plus $300 which gives you a total of $1800 per month. Now there are other variables which count towards your monthly payment, as the down payment, your credit score and the amount of years you want to repay the mortgage in play a major role in how much you will pay each month.
You can further add these variables into your calculation, or you can turn to one of the numerous mortgage calculators or seek the help of a mortgage professional.
Don’t forget about other expenses
While learning how much you would pay each month towards your mortgage can give you an idea of what you will be facing, you should know that there are other expenses you should take into account. When renting a home, the taxes you pay are relatively low, while becoming a homeowner will add the property tax, fire or hazard insurance, and you must also think about home repairs.
These all add up, and then you also have to think about the regular expenses for food, utility bills, kids, fuel for the car etc. when deciding on what mortgage you can afford. The best thing you could do would be to seek the counsel of a good mortgage professional such as Maureen Martin, as she will be able to offer you valuable advice.
Maureen can look at your income, estimate expenses and propose the right home loan plan to ensure you will be able to afford repaying the mortgage entirely and become the owner of your home without facing any financial difficulties.