A mortgage calculator is a calculator automated tool that can be found on a financial handheld calculator used to determine the financial implications of changes in one or more than one variable in a mortgage financing and arrangement. It is used by the provider to determine the financial switchability and by customers to determine the monthly repayment of a home loan applicant. The most common variables in a mortgage calculator include balance, loan, principal, periodic compound interest rate, the total number of payments, number of payments per year, and the regular payment amount where more complex calculators can be used for other cost mortgages such as state tax, local tax, and insurance.
California mortgage calculator
From the recession compounded by the lack of affordable housing California has had a slow recovery and the state has some of the highest median house values in the country along with having a high cost of living. You can use free mortgage calculators that will help you to estimate your monthly mortgage payment which includes taxes, your principal and interest insurance, and PMI in California. You can also find out the changes of the monthly payment by making an update to your down payment, house price, loan terms, and interest rate.
The housing market of California
In California, the golden state housing affordability has been deemed in crisis by many and on average California spends 25% of that is the largest percentage of their income on the housing of any state in the US. It is very important to keep in mind that local housing trends may be different from the overall statewide trend when looking at housing trends in California because the state is so large probably if California would have been a country, it would have the fifth-largest economy in the world. There has been a continuous rise in housing prices in recent years all over California and its largest metro areas, the San Francisco bay area and Los Angeles.
The formula for calculating mortgage payment
The formula looks like this-
M = P[i(1+i)^n]/[(1+i)^n-1]
Where the variable,
- M is for a monthly mortgage payment
- P is for the principal amount
- i is your monthly interest rate. The interest is likely calculated on an annual basis so you need to divide by 12 for each month of the year. For example, if your rate is 5% then your monthly rate will be 0.05/12 = 0.004167.
- N is the number of payments over the life of the loan, for example, if 30 years fixed-rate mortgage is taken then it will be 30 years x 12 months per year 360 payment.
Why do we use a mortgage calculator?
A mortgage calculator helps in determining your monthly house payment which is an important part of figuring out how much house you can afford, thus, monthly payment indeed is the biggest part of your cost of living. With the help of a mortgage calculator, you can estimate your mortgage payment when you buy a refinance or home. The mortgage calculator will help you to decide-
- The right home loan term length for you– for example, a 15 year fixed rate mortgage reduces the total interest you will pay but the payment will be higher whereas 30 years fixed-rate mortgage will lower your monthly payment but you need to pay more interest over the life of the loan.
- If an adjustable-rate mortgage is a good option or not- for example, 5/1 ARM is a good option if you are planning to be in a home for few years but you must be aware of the monthly mortgage payment that can change when the introductory rate expires or if the interest rate is trending higher.
- Whether you should buy too much house or not– The California mortgage calculator will give you a reality check on how much you can expect to pay each month which includes private mortgage, insurance, tax, other insurance.
- Whether you are putting enough money down- it is easier than ever to put just a little money down with a minimum down payment commonly as low as 3% thus the California mortgage calculator will help you decide the best down payment for you.
Components of monthly mortgage payment
- Property taxes
- Homeowners insurance
- Mortgage insurance
How can you reduce monthly mortgage payments?
- By extending the term
- By buying house
- By avoiding paying PMI
- By getting a lower interest rate