Mortgages can be intimidating, but they don’t have to be! This mortgage calculator will give you an idea of how much you can afford to spend on your mortgage based on your current income and expenses. Simply enter the price of the home you’re looking at buying, and the interest rate you’re expecting on your mortgage.
The calculator will then tell you how much you can afford to spend on your monthly mortgage payment in addition to other monthly costs like taxes, utilities, and insurance.
Monthly Payment
Monthly mortgage payments for this amount of debt depend on whether the loan is conventional or FHA. There are 30 year and 15 year conventional loans available at 4.5 percent and 3.5 percent interest rates, respectively.
According to Bankrate’s mortgage calculator, those loans require monthly payments of $1,231 for 30 years and $1,052 for 15 years- and that’s not including taxes or insurance on top of that.
Property Taxes
When buying property it is important to remember to factor in the cost of property taxes. Property taxes usually represent between 1-3% of the total purchase price and are generally paid quarterly.
Depending on where you live, they can make up quite a bit of your monthly mortgage payment, with some states charging as much as $1,000-$2,000 annually per thousand dollars in assessed value.
Home Insurance
One of the more difficult bills to estimate is home insurance. This can get even more complicated for people who don’t own their home, but instead live in one that’s rented. Some renters will have some coverage from their landlord, but this won’t cover all of the risks associated with living in the house.
Utility Bills
Some of the bigger costs that will come into play are your utility bills. The way to estimate them is to find out what the average utility bill for your area is, or get estimates from utility companies in your area.
Once you’ve estimated your monthly costs, multiply them by 12 and add the final number to the total price tag of your house. You’ll also need to factor in the mortgage interest rate (usually 4% on a 30-year mortgage) as well as any other fees related to closing on your home.
Maintenance and Repairs
If you opt for a 10-year fixed-rate mortgage, you’ll pay about $1,120.00 in monthly mortgage insurance premiums. This is for protecting the lender if you default on your loan and go into foreclosure.
Other than the mortgage insurance, your principal and interest payments will vary per month based on your interest rate and the amount of money borrowed. The more you borrow, the higher your monthly payment will be.
Opportunity Costs
The cost of buying an expensive home comes with the opportunity cost of not having invested your money elsewhere. The best time to buy a home is when you are young and have plenty of time to make up for any potential losses.
Buying an expensive house before you can afford it will significantly decrease your ability to pursue other goals, like starting a family or retiring early.
Start saving as much as possible and spend less than you earn so that in ten years, you will be able to afford the monthly payment.