Mortgage Rate Calculator

How does this mortgage payment calculator work?

This is a comprehensive financial tool that allows two types of calculations of the mortgage rates:

• Simulating the repayment schedule for a completely new mortgage, case in which the user is requested to input the following variables:

- Mortgage amount borrowed;

- Mortgage term in years;

- Annual interest rate %;

- Payment frequency (weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annually or annually);

- Loan start date month and year;

The relevant payment figures that are returned in this case consist in:

- Monthly payment value (or by any frequency as chosen by user: weekly, bi-weekly, bi-monthly, quarterly, semi-annually or annually);

- Total paid (principal plus interest);
- Total interest paid amount;

- Loan term in months;
- Payoff date when you will most probably be debt free;

- Amortization schedule with the detailed payment plan.

• Figuring out what will be the new repayment schedule in case of an existing mortgage balance where the user decides to add extra payment to the regular monthly payment value. In this scenario the user should provide these figures:

- Current mortgage balance;

- Annual interest rate;

- Current standard monthly payment;

- Additional/extra monthly contribution to the standard payment.

The details that are returned consist in the figures of the comparison between paying extra versus paying as stated within the initial amortization schedule:

* Payoff WITHOUT extra payment

- Standard monthly payment value;

- Number of the remaining payments;

- Estimated time to payoff;

- Total interest paid;

- Total paid;

* Payoff WITH extra payment

- Additional monthly payment added to the regular one;

- Adjusted monthly payment amount (standard + extra);

- No. of payments left;

- Forecasted time to repay your mortgage balance;

- Total interest owed;

- Total paid.

* Savings as a result of extra payments from interest not being paid.

* The no. of regular payments you skip by paying early.

No matter of the simulation type, the algorithm of this mortgage rate calculator uses the compound interest formula as explained below:

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

Where:

P = loan amount borrowed / Principal owed

i = interest rate per month in decimal format

n = the term in months obtained by multiplying the loan term in years with 12

Please note this equation is applicable in case of monthly repayment frequency.

Example of 2 calculations

Scenario 1: Let’s assume a mortgage offer with the following details:

- Mortgage amount = $200,000

- Time to payoff = 25 years by monthly payments.

- Yearly interest percentage = 3.45%

- Loan data is considered April 2015.

Results:
■ Monthly payment: $995.89
■ Loan amount: $200,000.00
■ Total Paid: $298,767.60
■ Total Interest Paid: $98,767.60
■ Loan term: 300 months
■ Annual Interest rate: 3.45 %
■ Payment frequency: Monthly
■ Payoff date: March, 2040

Case 2: Let’s consider that an individual tries to figure out what happens with his amortization schedule for an existing mortgage in case he decides to pay early his loan:

- Current balance owed= $100,000

-  Annual interest rate = 3.25%

- Current standard monthly payment = $900

- Extra payment = $200

Results:

Payoff WITHOUT an Extra Monthly Payment
■ Monthly payment amount: $900.00
■ Remaining payments: 132.36
■ Time to payoff: 11 years & 0 months
■ Total interest paid: $19,126.71
■ Total paid for the mortgage: $119,126.71

Payoff WITH an Extra Monthly Payment
■ Additional monthly payment added to principal: $200.00
■ Adjusted monthly payment amount: $1,100.00
■ Remaining payments: 104.50
■ Time to payoff: 8 years & 9 months
■ Total interest paid: $14,952.45
■ Total paid for the mortgage: $114,952.45

■ Savings as a result of extra monthly payments: $4,174.26
■ By paying early you will make fewer payments in a number of 27.86 payments.

What you need to be eligible for the mortgage amount you may want to take?

These are considered general aspects you should be analyzing before deciding to apply for a mortgage loan:

• A good credit score and history which is gained in years by paying in due time your debts and bills. This is a measure of how good payer are you in the eye of a lender.

• A down payment which usually varies from one lender to another between 5% to 20% from the home price. Please note that the higher the down payment is the better for you, as you can get a lower mortgage quote.
• A level of annual gross income that allows you to pay an average per year between 28 and 36% from it on debts. Please consider that the debt to income ratio is an indicator that helps lenders decide your affordability, thus the total amount you can take. For instance in case you earn $35,000 per year it is considered that you can afford to pay an average within a year on debts an amount between $9,800 and $12,600. That translated into monthly means somewhere between $816.66 and $1,050.