A Useful Tool for Homebuyers.

Purchasing a home is one of the most significant financial decisions that people make in their lives. It involves finding the right property, securing a loan, and calculating the monthly mortgage payments. One of the most useful tools available to homebuyers is a simple mortgage calculator. This article will discuss the simple mortgage calculator, its benefits, and how it works.

What is a Simple Mortgage?

Before we dive into the details of a simple mortgage calculator, let’s first define what a simple mortgage is. A simple mortgage is a type of loan that is secured by the borrower’s property. It is a legal agreement between the lender and the borrower, in which the borrower agrees to pay back the loan amount over a set period, along with the interest charged.

Simple mortgages are different from other types of mortgages in that they have fixed interest rates and fixed repayment terms. This means that the interest rate and monthly payments remain the same throughout the life of the loan. Simple mortgages are popular among homebuyers who want to have a predictable payment plan and budget their finances accordingly.

What is a Simple Mortgage Calculator?

A simple mortgage calculator is an online tool that helps homebuyers calculate their mortgage payments. It takes into account various factors, such as the loan amount, interest rate, loan term, and down payment, to give an estimate of the monthly mortgage payment. The calculator also shows how much interest the borrower will pay over the life of the loan and the total cost of the loan.

There are several types of simple mortgage calculators available online, and they vary in complexity and features. Some calculators only require the basic loan information, while others allow for more detailed inputs, such as taxes, insurance, and extra payments. Some calculators also provide amortization tables, which show the breakdown of the loan payment and interest over time.

How Does a Simple Mortgage Calculator Work?

A simple mortgage calculator works by taking the loan information and using a formula to calculate the monthly payment. The formula used in most simple mortgage calculators is the following:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where: M = Monthly payment P = Loan amount i = Interest rate (per month) n = Total number of payments (number of years x 12)

For example, let’s say a homebuyer is looking to purchase a home worth $300,000 with a 20% down payment and a 30-year fixed-rate mortgage with an interest rate of 3.5%. The loan amount would be $240,000, and the monthly payment would be calculated as follows:

M = $240,000 [ (0.0035/12) (1 + 0.0035/12)^360 ] / [ (1 + 0.0035/12)^360 – 1]

M = $1,077.71

This means that the monthly payment for this loan would be $1,077.71, and the total cost of the loan over 30 years would be $388,575.60.

Benefits of Using a Simple Mortgage Calculator

There are several benefits to using a simple mortgage calculator when shopping for a home. These include:

1. 1. Helps in Budgeting: A simple mortgage calculator can help homebuyers plan their budget and understand the financial commitment involved in purchasing a home. It allows buyers to see how much they can afford and how much they need to save for a down payment.

1. 1. Saves Time: Calculating mortgage payments manually can be time-consuming and confusing. A simple mortgage calculator provides quick and accurate estimates of monthly payments, interest, and total loan costs.

1. 1. Allows for Comparison: With a simple mortgage calculator, homebuyers can

easily compare different loan options from different lenders. They can input various interest rates, loan terms, and down payment amounts to see how each option affects the monthly payment and total loan cost. This helps buyers make informed decisions and choose the loan that best fits their needs and budget.

4. 4. Provides Amortization Tables: Many simple mortgage calculators provide amortization tables, which show how the loan payment and interest are broken down over time. This can be helpful in understanding how much of each payment goes towards interest and how much goes towards the principal. It can also show how extra payments can shorten the loan term and save on interest costs.

4. 4. Helps in Refinancing: A simple mortgage calculator can also be helpful for homeowners who are considering refinancing their mortgage. It allows them to compare their current mortgage payment to potential new payment options and see how much they can save on interest and total loan cost.

Types of Simple Mortgage Calculators

There are several types of simple mortgage calculators available, each with different features and capabilities. Some of the most common types include:

1. 1. Simple Mortgage Calculator with Amortization: This type of calculator provides an amortization schedule that shows the monthly payment, interest, and principal paid over the life of the loan.

1. 1. Simple Mortgage Calculator with Down Payment: This type of calculator takes into account the down payment amount and calculates the loan amount and monthly payment based on that.

1. 1. Simple Mortgage Calculator with Taxes: This type of calculator includes property taxes in the calculation of the monthly payment.

1. 1. Simple Mortgage Calculator with Extra Payments: This type of calculator allows for the input of extra payments and shows how they can shorten the loan term and save on interest costs.

1. 1. Simple Mortgage Calculator with Refinance Options: This type of calculator helps homeowners compare their current mortgage payment to potential refinancing options and shows how much they can save on interest and total loan cost.

Examples of Simple Mortgage Calculators

There are several simple mortgage calculators available online, both free and paid. Some of the most popular ones include:

1. 1. MoneyChimp Simple Mortgage Calculator: This free online calculator allows users to input loan amount, interest rate, loan term, and down payment to calculate the monthly payment and total loan cost.

1. 1. Zillow Simple Mortgage Calculator: This free online calculator includes options for property taxes, insurance, and PMI (Private Mortgage Insurance) in the calculation of the monthly payment.

1. 1. Bankrate Simple Mortgage Calculator: This free online calculator allows for the input of extra payments and provides an amortization table to show the breakdown of the loan payment and interest over time.

1. 1. Simple Mortgage Calculator Excel Spreadsheet: This is a downloadable Excel spreadsheet that allows users to input loan information and calculate the monthly payment, total loan cost, and amortization schedule.

1. 1. Simple Mortgage Calculator App: There are several simple mortgage calculator apps available for both Android and iOS devices. These apps provide quick and easy access to mortgage calculations and amortization tables on the go.

Conclusion

A simple mortgage calculator is a useful tool for homebuyers and homeowners to calculate their mortgage payments and understand the financial commitment involved in purchasing a home. It allows for quick and accurate estimates of monthly payments, interest, and total loan costs, as well as comparisons of different loan options and refinancing options. With the availability of several free and paid online calculators, homebuyers and homeowners can easily access this valuable tool to make informed decisions about their mortgage loans.