Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Using a Mortgage Calculator and other Mortgages topics.
While mortgage calculators can look a bit different from each other, they all work approximately the same way. You enter a few pieces of data and the software will calculate the missing piece of information. For instance, say you want to find the estimated monthly payment you'd have if you borrowed $200,000 at 6.25% for 360 months (30 years).
Most mortgage calculators will have areas for you to enter the amount ($200,000), the interest rate (6.25%), and the term (360 months). Tell it to “calculate” and it will tell you that your estimated monthly payment will be $1,231.42. Do not worry if you try a few different calculators and the payment varies by a small amount. Calculators use different numerical rounding rules, so the resulting payment may be slightly different.
Some mortgage calculators allow you to find out how much mortgage loan you can afford based on current interest rates and your gross monthly income. Others may allow you to enter a payment you can afford, after which they will calculate the maximum loan amount you can expect to borrow at current interest rates. The software allows you to change any component (amount, interest rate, term, etc.) to calculate different monthly payments. This helps you compare different mortgage programs (fixed rate and adjustable rate) to help you find the right loan for you.