A Mortgage Calculator is an essential tool that helps you to estimate the monthly installments. Buying a home is one of the biggest financial decisions have will make in your life, So for the confirmation of your choice, knowing about mortgage payment is crucial without calculator. It is also helpful to prepare your budget and compare different loan options.
So, in this article we are going to discuss all the necessary details about how to work mortgage loan EMI calculator, benefits of using this tool as well as how to use it effectively.
What Is a Mortgage Calculator?
A Mortgage Calculator is a kind of an online tool that will helps you to estimate your monthly mortgage payment based on the loan amount, its interest rates as well as how long the long tenure.
Once you enter these details in the tool, you can get to know an accurate breakdown of your EMI (Equated Monthly Installment), what is the payable interest and overall cost of the loan.
Key Features of a Mortgage Loan Calculator:
Here are some features of a Mortgage Loan Calculator which describes how it is useful and what should include in that.
- Monthly EMI Calculation: This is one of the important feature who tells you that, how much you need to pay every month.
- Interest Details: Interest details shows how much total interest you will pay over the time.
- Repayment Schedule: It provides you a month-by-month or year-by-year plan to repay your loan.
- Loan Comparison: Loan comparison helps you to compare different loan options to choose the best one out of these options.
Types of Mortgage Calculators
Basic EMI Calculator: In basic EMI Calculator you can estimates monthly payments based on the principal amount, interest rates and tenure of loan.
Amortization Calculator: This calculator provides a detailed repayment schedule by showing principal vs. interest breakdown.
Refinance Calculator: Refinance Calculator helps to compare existing loans with new refinancing options, By using this you can reach at your financial decisions.
Affordability Calculator: This calculator determines how much loan you can qualify for based on the income and expenses.
How Does a Mortgage Loan EMI Calculator Work?
The basic formula of mortgage loan EMI calculator is:
P x R x (1+R)^N / [(1+R)^N-1]
Where-
- P = Principal loan amount.
- N = Loan tenure in months.
- R = Monthly interest rate.
- R = Annual Rate of interest 12/100
Example Calculation:
If you are going to take a $300,000 loan at 6% interest for 20 years, then your EMI would be calculated as per the calculator calculation which follows:
- P = $300,000
- r = 6% / 12 = 0.005 (monthly rate)
- n = 20 × 12 = 240 months
By using the formula we have reach at this result which is below:
This means your monthly payment would be approximately $2,149.29.
Benefits of Using a Mortgage Calculator
There are several benefits of using a mortgage calculator.
First benefit is financial clarity before borrowing: A mortgage calculator helps you to determine that can you afford the monthly payments of EMI’s or not. It can helps you to avoid over-borrowing by setting a realistic budget.
Second benefit is compare loan options: You can compare different loans, their interest as well as tenure and download payments.
In loan tenure you can get shorter terms which includes higher EMIs but their interest rates may low. While, in interest rates you can compare fixed rates vs adjustable rates. After that, you can see how a larger down payment reduces EMI.
Third benefit is Plan Prepayments to Save on Interest: In this, by using an amortization calculator; you can see how making extra payment reduces your loan term and total interest of loan.
Fourth benefits is Assess Refinancing Opportunities: If interest rates of the loans are drop, a refinance calculator will helps you to determine if switching loans saves your money.
How to Use a Mortgage Loan Calculator Effectively
If you want to get a perfect assumption or an output then, you must need to use calculator effectively. Here are provides you basic steps to use Mortgage Loan Calculator effectively.
Step 1: Enter Loan Details
In 1st step all you need to put the basic loan details for the calculation. The amount of loan, you are going to borrowing, the annual interest rate which is offered by the lender and the repayment period of loan (eg; 15,20 or 30 years).
Step 2: Adjust Variables for Better Insights
In the second step, if you want to see different down payment options (10%, 20%) then; change the rate of interest and see the EMI changes. In that you can compare 15 years to 30 years mortgage to see the different interest.
Step 3: Review Amortization Schedule
In the third step you can check and analyze how much interest you’ll pay over the time. Even you can see, how much extra payments can shorten your loan term so that it can be minimize too.
Step 4: Compare Lenders
And at the last step, Use the calculator to evaluate different offers from the multiple banks or lenders. Then finalized your loan after look at the best interest rates and loan terms.
Conclsion
A mortgage calculator is one of an essential tool for anyone who are willing to take a home loan. This tool is suitable for everyone like; If you are a first time buyer or a looking for refinance, mortgage calculator will helps you more effectively to take decisions accordingly. You can find best possible loan options and achieve your dream of home ownership without any financial struggle or stress.
FAQs
What is a mortgage loan EMI calculator?
A mortgage loan EMI calculator is a digital tool that computes your monthly mortgage payments based on loan amount, interest rate, and tenure.
Can I use a mortgage calculator for refinancing?
Yes! Input your new loan details to compare refinancing savings.
Does a higher down payment reduce EMI?
Yes, a larger down payment decreases the loan amount, lowering EMIs.
Are mortgage calculators free to use?
Yes, most online mortgage calculators are free and easy to use.
