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How to Calculate Your Mortgage and How It Can Help You Save Long Term

To estimate your monthly mortgage payment, use our mortgage calculator. With it, you are able to input a different home price, down payment, interest rate, and loan term to see how your monthly payments will change.

The number of people who prefer owning a home to paying rent has skyrocketed in the past decade, and for a good reason. For starters, owning a home is less expensive than renting in the long term. Plus, you get to enjoy your space while making a few changes to the house, such as repainting or adding an extra room without breaking the bank.

But do you know how to calculate your mortgage so you save money in the long term? If not, this article is for you. Here’s how to calculate your mortgage and save money long-term.

How to Calculate Your Mortgage

Use a Mortgage Calculation Formula

You can use this formula to calculate a mortgage using the loan principal and the interest without factoring in HOA, taxes, and homeowner’s insurance fees. Let’s break it down a bit for easier understanding.

M = P [ I(1 + I)^N ] / [ (1 + I)^N – 1]

  • M-means mortgage
  • P-means principal, which is the down payment or deposit amount you will pay to get the loan
  • N-means the number of payments you will make to pay off the loan

An adjustable-rate mortgage has dynamic rates which change over time, meaning you have to use the PMT function of Microsoft Excel to create an amortization table. This allows you to change the formula as the mortgage changes to capture the remaining time and reflect the new terms.

Use Mortgage Calculators

Some people generally find it hard to understand or input the above formula into ordinary calculators. If you’re one of them, worry not. You can use an online mortgage calculator. Here are examples of automatic calculators you can use:

  • Amortization Calculators
  • Refinance Calculators
  • Purchase Calculators

These are just two of the many methods you can use to calculate your mortgage. Regardless of the method you choose, make sure it’s comprehensive and accommodates all factors relating to your loan.

How Calculating Your Mortgage Can Save Money Long Term

Calculating your mortgage will help you arrive at the final figures, which will help you make the following sound decisions to save money long term:

The Loan Term

The loan period is months or years you will pay off the loan. Longer terms attract low monthly repayments with higher interests, while shorter terms are the opposite. Calculating your mortgage will help you know the loan term so that you can take measures such as recasting and increasing monthly principal payments and down payment to cut on the loan term, thus reducing interest payable over time.

Determining Affordability

Calculating your mortgage helps you arrive at monthly repayments, which enables you to judge whether you can afford it or not. Look at your outstanding debt, income, and credit score and compare it with the monthly repayments to save in the long term.

There’s no reason to overspend on a house when you have other matters like emergencies, financial goals, and retirement to attend to. Calculating your mortgage will help you pick a home loan with an affordable monthly payment, making it less likely you’ll miss or skip a payment.

Need a Mortgage? Talk to Better Rate Mortgage.

Are you looking for a mortgage or have any mortgage-related questions, contact the experts at Better Rate Mortgage. We’ll be happy to help.

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