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Mortgage Calculator: Estimate your payments, weigh your Options

Updated ·3 min read Expert verified
Written by Calbrea
Reviewed by Jasmine Grainger

Terms to Remember:

  • Home Price: The total cost of the home you are considering.
  • Down Payment: How much of your own cash you'll put down upfront to buy the home. Keep in mind this is different from Cash Available to Close.
  • Loan Term: How long your mortgage lasts, usually 15 or 30 years.
  • Credit Score: Your credit rating, which helps determine your loan's interest rate.
  • Annual Interest Rate: The yearly interest rate on your loan, which affects your monthly payment.
  • Property Taxes: The annual taxes you pay on your home. Input your amount or ZIP code for estimates.
  • Homeowners Insurance: Coverage for home damage or accidents. This is your yearly premium.
  • HOA Fees: Monthly fees paid to a homeowners association, if applicable.
  • Monthly PMI: Insurance you pay if your down payment is less than 20% of the home price. Costs around $30 to $70 per month per $100,000 borrowed. This protects the lender in the unfortunate event of a foreclosure.

How to reduce your monthly mortgage payments?

  • Increase Your Down Payment: Putting down more money upfront lowers your loan amount, reducing your monthly payments. Aim for at least 20% to avoid private mortgage insurance (PMI). Even adding 5% more can cut your PMI costs. Don't have a large lump sum saved? There are first-time homebuyer assistance programs available, closing cost grants, and more.
  • Secure a Lower Interest Rate: A higher down payment can help you qualify for a lower interest rate. Lowering your loan-to-value ratio (LTV) increases your chances of scoring a better rate. Buying points upfront can also lower your monthly payments (Rate buy down calculator)
  • Consider Relocating: Your dream home may be in another part of town, a different city or even state. A lower priced home = a lower monthly mortgage payment.
  • Improve Your Credit Score: A higher credit score can lead to a lower interest rate. Reduce your debt-to-income ratio (DTI) to show lenders you can comfortably handle your mortgage, potentially securing a better rate.
  • Negotiate Property Taxes: If your property taxes have increased significantly, consider appealing the assessment or negotiating with your local tax authority for a reduction.
  • Rent Out a Portion of Your Home: If your home has additional space, such as a basement apartment or spare room, consider renting it out to generate extra income to offset your mortgage payment.Some call this House Hacking.

Your Next Steps

  • If you aren't using equity from another home, start saving for your down payment and closing costs to ensure you're financially prepared. Pro Tip: Don't forget to account for transaction fees that you may need to pay prior to closing like appraisal cost, home inspections, earnest money, and more.
  • Make sure your credit score is in good shape to qualify for a mortgage and get favorable interest rates. Find a trusted Credit Counselor.
  • Work with a trusted lender to get pre-approved for a mortgage to understand your budget and show sellers you're serious. Some Realtors might want to see a pre-approval letter before they will work with you.
  • Explore different neighborhoods to find the right fit for your lifestyle and budget. Pro Tip: print a picture of your dream home and place it on your refrigerator.
  • Partner with a trusted real estate agent who can guide you through the home buying process.
  • Begin searching for homes that meet your criteria either in person or online to get a feel for what's available.

Explore the Possibilities

Compare different mortgage scenarios to get a better understanding of your options. Tweak it until you find a sweet spot. This will help you make an informed decision that aligns with your goals.

How Much Home Can I afford?

Check out our Home Affordability Calculator. This will allow you to account for things like monthly debts, expenses, and income.