A home loan calculator sitting on top of a one hundred dollar bill.

How to Use a Home Loan Calculator

A home loan calculator is a great tool to use in order to accurately estimate the amount of your potential home loan payments using key variables.

Basically, every home loan calculator will ask for three unique variables to determine the results:

  • Repayment Terms
  • Interest Rate
  • Projected Loan Amount

The projected loan amount is the total amount of money you actually need to purchase the property. Once you've entered this figure, you can play with the amounts by entering various interest rates and one or more repayment terms in order get different results to meet your particular financial criteria before making a decision.

Interest Rates

There are a number of interest rates to choose from based on the current conditions of the market, reasons for the loan, and your credit profile. The interest rate will generally depend on the term of loan you need. Most home loan calculators online let you enter several different combinations to achieve a variety of different results. For instance, if you need a home loan in the amount of $100,000, you can easily determine how much you're required to repay within a time frame of either 15 or 30 years. The interest will vary relative to each loan period. Therefore, if you're considering a 30-year loan at 6.5% interest, then the repayment amount each month is about $632.00.

A home loan calculator lets you generate your own unique loan terms before actually applying for one. Today, rather than just letting the financial institution or bank completely dictate the terms of the loan, you can predetermine your own preferences as well. Naturally, prior to approving your loan, the lender will perform a comprehensive background check to determine your credit worthiness, number of dependents, employment status, etc. Although home loan calculators vary somewhat in look or ease of use, they all basically offer the same information.

Need to refinance your existing mortgage? There's a calculator for that too. Use a refinance savings calculator. A refinance savings calculator assists homeowners in determining how much they can save if they decide to refinance their mortgage. Here are some of the common inputs of a refinance calculator:

  • Interest rate, loan balance, monthly payment, and the remaining term of your current home mortgage loan
  • The new loan's term and interest rate
  • Any costs relative to refinancing

The end results will reveal the cost savings between your current monthly payment and your new monthly payment. Keep in mind that this method only focuses on the actual payment savings, not the entire cost of interest, which is another aspect to consider before refinancing your current home mortgage loan.

Some home loan calculators additionally ask how many payments you'll be able to make over the course of a year, while others consider property tax expenses, home insurance, and the amount of your down payment as well. By using all of these figures together, a home loan calculator is quite accurate at projecting a monthly home mortgage payment that includes the principal amount, interest, insurance, and taxes. Therefore, it's wise to make use of these kinds of calculators in order to get a good sense of your overall financial picture when buying or refinancing a home.