How To Use A Mortgage Calculator Before A Home Purchase or Refinance

When planning to refinance or purchase a home you need to be sure you are getting payment that fits into your budget comfortably. A mortgage calculator is a great tool to help you out with that. A mortgage calculator can calculate mortgage payments and an amortization schedule for your records. Let’s look at how easy the process is.

Mortgage Balance

The first factor used is the mortgage principal, also called the amount financed. This is either the amount of money you owe on your current mortgage or the amount of money you’ll be borrowing to purchase a home. Remember if you are financing any interest points or broker fees, these will need to be included. If you are unsure, add 3-5% to the purchase or refinance amount for safe measure.

Rate of Interest

One of the critical factors in determining monthly payments is the interest rate. This can cost you tens to hundreds of thousands of dollars over the course of the loan. Origination fees are fees added to the principal balance of the loan in exchange for a lower interest rate. This is generally not a good idea because this fee can never be recovered regardless of when you pay off the loan.

Length of Loan

The length of the loan is the number of months you have the loan financed for. For example, a 20 year loan is equivalent to 240 months.

Taxes, Insurance, and PMI

Mortgage calculators can calculate what escrow payments will be based on real estate taxes, home insurance, and private mortgage insurance (PMI). PMI is required on a home loan where there is less than 20% equity in the home. Payments can be calculated with or without this info.


The results of the calculator can be viewed on screen. An amortization schedule can be printed for you to keep for your records. This information is helpful in that you can see what your payments are and how much interest you will pay over the life of the loan.