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A mortgage payment calculator is the first thing most people search for when considering refinancing a mortgage, or buying a new home. Using a mortgage calculator, you can apply today's interest rate to the amount of your new mortgage, and find out what your new monthly mortgage payment will be.
You can easily find a mortgage payment calculator online. For example, there are free mortgage calculators on several sites, which allow you to enter the interest rate, the term of the mortgage, and the mortgage principal amount, in order to calculate your new monthly payment.
The formula to calculate the monthly payment on a mortgage is one of those horrible bits of high school Math that most people try to forget as soon as they have sat the exam - if not before - so there is really no alternative for most people, than to use a mortgage calculator.
You may find that your spreadsheet software has a function which will calculate monthly payments for a mortgage, although in most cases an online mortgage calculator is easier to find - and simpler to use!
The next question ir consider is whether the new monthly payment is affordable. As a rule of thumb, your mortgage repayment should amount to no more than a third of your after-tax income. This will ensure that your payment is affordable.
If the new monthly mortgage figure comes out to be more than a third of your after-tax income, you will need to reconsider your purchase, or find a better interest rate.
You can use the mortgage calculator to work out how much you can afford to borrow. Simply enter the interest rate and term of the loan, and then adjust the amount of the principal until the mortgage calculator shows a monthly payment equal to one third of your after-tax income.
Combine that figure with any down payment or equity you have available to calculate the total price you can afford to pay for your new home.
Whether you use an online mortgage payment calculator or not, it is very important that you don't overextend yourself by borrowing more than you can afford. Use the mortgage calculator to make sure your new mortgage is affordable.
Mark Bennett is a staff writer for MoneyTalks, and contributes regularly to other financial sites.
