How to Figure Out a Mortgage Payment

Purchasing a new home is both fun and exciting – at least it should be. Estimating your budget before applying for a mortgage is a great way to avoid a home buyer’s pitfall, with so many homes foreclosing it is vitally important to understand how much home you can truly afford to pay comfortably each month. When figuring out a mortgage payment, it is important to remember the other obligations that are intertwined into the monthly mortgage payments, such as insurance, taxes and other applicable fees set-forth in your contractual obligations.

Difficulty: Moderately Easy

Instructions

1. Go to your banking institution’s website and utilize their mortgage calculator. Many banking institutions that offer mortgage services including mortgage payment calculators free of charge to their banking customers.

2. Input the exact asking amount for the property you are interested in figuring a mortgage payment for into the calculator.

3. Decide on the length of the loan term. Lending institutions offer a variety of loan terms to meet the needs of the consumer; some loan terms are 10 years, 12 years and go all the way to 40 years for some lending institutions. The longer the loan term, the less the overall monthly mortgage payment will be, but the interest paid on the length of the loan will be exceedingly greater than that of a 10 year loan which has higher monthly payments but the interest is paid off in a shorter period of time.

4. Find out which lending institution offers you the most reasonable interest rate. Research several lenders and decide which one will work the best for your mortgage financing needs. Also consider the APR (annual percentage rate) charges for these lenders it is important in determining which lender will offer you the overall best financing. Although the mortgage payment is figured out by using the interest rate and not the APR, it is a good overall indicator for making a wise financial decision.

5. Enter your annual property taxes for the property, since each property is taxed and you will be responsible for paying those taxes it is necessary to enter this information into the mortgage calculator.

6. Contact your insurance company for home insurance quotes, after receiving a quote you can plug those estimates into the mortgage calculator to figure out your mortgage payment. Once you have entered the information needed to receive an estimated mortgage payment, decide if you can comfortably make those payments without causing yourself a financial strain. Figuring out your mortgage payment is the first step in making an honest assessment of what you can afford to pay for a monthly mortgage payment.

Tips & Warnings

• Always contact your insurance company to get a quote for home insurance.
• Seek financial guidance to get an accurate assesment of how much home you can afford.
• Learn to save money for your down payment.
• Open an account to reserve money for miscellaneous purchases and repairs for your home.
• Never purchase a home beyond your financial capacity.

Resources

[msc3]

on 3/12/2009 Microsoft Excel has a really useful mortgage calculator template. It doesn't factor in taxes and insurance, but you can enter all kinds of different additional principle payment amounts in lots of places. I made a demo of how it works at http://www.yourtwobits.com.