Mortgage Calculator, it’s easy to use and very simple to understand of Mortgage Calculation.
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What is Mortgage Calculator?
Answer: Mortgage calculators are useful tools you found online, often provided by banks, financial websites, or real estate platforms. They help you figure out how much your mortgage payment will be when buying a home. Here’s how they work:
- Input Information: You start by entering some details such as the loan amount you require (how much money you want to borrow), the interest rate offered by the lender (the cost of borrowing the money), and the loan amount. Tenure (how long you have to pay it back).
- Calculations: Once you enter these numbers, the calculator does the math for you. It crunches all the numbers using a formula that considers the loan amount, interest rate, and loan term to give you an estimate of your monthly mortgage payment.
- Additional Features: Some calculators may have additional features. For example, they can show you how your payments change if you pay more up front, or if you opt for a shorter or longer loan term.
- Helpful Insights: They can also provide other useful information, such as how much of each payment goes toward paying down loan principal (the original amount borrowed) versus interest (the cost of borrowing the money) .
- Plan Ahead: Mortgage calculators can be useful when you’re planning your budget for buying a home. They give you a good idea of what you can afford in terms of monthly payments based on different loan options.
Overall, they are great tools for anyone considering buying a home, as they provide valuable insight into the financial aspects of homeownership in a user-friendly manner. Just remember, while mortgage calculators give you an estimate, your actual payment may vary depending on factors like taxes, insurance and any additional fees.
How to Mortgage calculate?
Calculating a mortgage involves determining the monthly payment required to repay the borrowed amount (principal) and interest over a specified period. Some of the key factors in this calculation are:
- Loan Amount (Principal): This is the amount you borrow from the lender.
- Interest Rate: The annual interest rate charged by the lender, expressed as a percentage.
- Loan Term: The period of time over which the loan will be repaid, usually in years.
- Payment Frequency: How often payments are made (usually monthly).
The formula for calculating monthly mortgage payments is commonly known as the amortization formula. There are two main formulas depending on whether the interest rate is fixed or adjustable. Here’s how to calculate each:
Fixed Rate Mortgage Formula:
[ M = P \times \frac{r(1+r)^n}{(1+r)^n-1} ]
Where:
- ( M ) = monthly mortgage payment
- ( P ) = Principal Loan Amount
- ( r ) = monthly interest rate (annual rate is divided by 12 and expressed as a decimal)
- ( n ) = Total number of payments (loan tenure in years is multiplied by 12, since payments are made monthly)
Adjustable-Rate Mortgage (ARM) Formula:
The formula for an ARM is a little more complicated because the interest rate can change over time. Here’s a simplified version:
[ M = P \times \frac{r(1+r)^n}{(1+r)^n-1} ]
However, in the case of ARMs, the interest rate (R) will change at specific intervals, so you will need to recalculate the monthly payment when the rate changes.
There are several online mortgage calculators available that can make these calculations for you. You enter the loan amount, interest rate, loan tenure and it gives you the monthly payment. This is often the easiest way to find out your monthly payment.