Online mortgage calculators are everywhere, but getting an accurate monthly payment isn’t as simple as plugging in a few numbers. In this video, I break down what goes into calculating your mortgage payment and show you how to use some of the best tools available. You’ll learn how to factor in the key variables that determine your monthly payment, including:
🏠 Purchase price and down payment
💰 Interest rate and loan term
📈 Property taxes and insurance
🔒 Private Mortgage Insurance (PMI) and HOA fees
Whether you’re a first-time buyer or getting ready for your next move, this step-by-step guide will help you calculate your payments with confidence and avoid the common mistakes that lead to surprises later.
📊 Resources mentioned:
Karl’s Mortgage Calculator: https://www.drcalculator.com/mortgage/
Mortgage Reports (current rates): https://themortgagereports.com/
SmartAsset (property taxes): https://smartasset.com/taxes/property-taxes
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Andersen Realty Group
📲 Text/Call: (708) 766-8519
📩 Email: eric@eandersenhomes.com
🌎 https://www.ericandersenhomes.com
Did you enjoy this video or find it helpful? If so, be sure to 𝐋𝐈𝐊𝐄, 𝐒𝐇𝐀𝐑𝐄, & 𝐒𝐔𝐁𝐒𝐂𝐑𝐈𝐁𝐄 to my YouTube Channel.
Want to know what your home is worth?
https://www.ericandersenhomes.com/go/home-value/
Looking for homes for sale? Search the entire MLS on my website: https://www.ericandersenhomes.com/homes-for-sale/
Or, better yet, contact me directly for help with buying or selling a home: https://www.ericandersenhomes.com/contact/
Read my reviews:
Google: https://www.bit.ly/andersenrealtygroupgooglereviews
Zillow: https://bit.ly/andersenrealtygroupzillow
I have a number of awards and designations, including:
⭐️ Gold, Diamond, & Platinum Sales Award (Mainstreet Organization of REALTORS®)
⭐️ 20 under 40 (Mainstreet Organization of REALTORS®)
⭐️ Endorsed Local Provider (RamseyTrusted)
⭐️ Best of Zillow
⭐️ Pricing Strategy Advisor (National Association of REALTORS®)
⭐️ Certified Staging Consultant (Mainstreet Organization of REALTORS®)
⭐️ Accredited Buyer’s Representative (ABR®)
Transcript:
Online mortgage calculators are everywhere, but accurately calculating mortgage payments can be deceptively hard. I’m Eric with Andersen Realty Group, and your mortgage payment will depend on a number of complex factors that can vary based on market conditions, your financial situation, and your preferences. In this video, we’ll walk through what you need to know to come up with an accurate mortgage calculation.
The first thing you’ll need is a good mortgage calculator. I like Karl’s mortgage calculator, which I’ve linked to in the comments, below. It allows you to do simple or complex calculations, and it even calculates your PMI based on FICO score if you’re putting less than 20% down. Once you have your mortgage calculator, you’ll need to know 6 to 8 other pieces of information, including purchase price, down payment, interest rate, loan term, property taxes, property insurance, and possibly also PMI and HOA fees, if applicable. We’ll walk through each of these in turn.
Purchase price is probably the easiest. While you don’t how much a given home will sell for, you do get to decide how much to spend. Homes that are on the market for a long time generally sell below asking price, while homes that are new to market can get competitive and sell over asking price. So let’s say you have a budget of $500,000 for a home. Simply put that into the calculator, and move on to the next step. But if you end up changing your purchase price, that can affect other factors like property taxes and down payment, so be mindful of that.
After purchase price, you’ll need to enter in your down payment. Many buyers will put down 20%, since that’s how much you need to put down on a conventional loan to avoid paying private mortgage insurance, or PMI, to the lender. Many loan programs will let you put down as little as 3%, so 20% isn’t an absolute requirement. If you put down less than 20% on a conventional loan, you will need to factor the PMI amount into your calculation. PMI is an insurance policy that’s paid to your lender to protect them against default on a loan that has a down payment below 20% on a conventional loan. FHA loans always require PMI even if you put down 20% or more, while conventional loans only require PMI if your equity is below 20%. If you have a conventional loan and initially put down less than 20%, be sure to call your lender once your equity reaches 20% and ask them to drop PMI from your payment. They’ll gladly continue to collect it if you don’t contact them. It doesn’t cancel automatically. If you need PMI for your payment calculation, Karl’s mortgage calculator will determine that amount for you, but you need to go into loan settings, turn PMI on, and input your credit score so it can give you the accurate amount. On a $500,000 loan with a 5% down payment and a FICO score between 720-730, PMI comes to an extra $261.25/mo, so it’s not a small amount, but it does change with credit score. If you’re above 760, that $261 goes down to $150.42. That’s a savings of over $100/mo, and the only difference is a higher credit score. One final note on down payment, Karl’s mortgage calculator will let you input either a percent or a flat dollar amount if you aren’t working with a fixed percent. If you put in $17,500 on a $500,000 purchase, it will automatically adjust the percent to 3.5.
Once you have your purchase price, down payment, and possibly PMI amount, the next thing you need to put into the calculator is your interest rate. Interest rates vary by market conditions, location, and your personal finances, so the best way to get your actual rate is to talk with a great lender. If you need one, let me know and I’d be happy to put you in touch with one of mine. But if you’re early on and just looking to get a general idea, you can find the current national average rate on several websites. I like the Mortgage Reports, linked below, which updates daily and shows the rate for 7 different loan types, how that has recently changed, what’s driving rates, and how experts predict they will change going forward. Rates can have a big impact on your payment. A half a percent on a $500,000 home can translate to over $150/mo, so be sure to keep your eye on rates and be sure to get in touch with a good lender so you don’t have any surprises with your rate. I have had buyers cancel contracts once they found out their rate, so best to know what to expect before writing an offer. The other thing you’ll need to put into the calculator is your loan term. If you’re doing a 30-year fixed rate loan, under years, simply type in 30. If you’re doing an ARM or an adjustable rate mortgage, Karl’s has an entire tab for that.
After purchase price, down payment, and interest rate, you need to enter in the property tax amount. You will inherit the current property tax bill on the home, but the county will reassess that based on your purchase price. How much you pay for a home will determine your future property tax bill. When I’m calculating my own payment, I always base my taxes on how much I am planning to spend on them home and not on the current bill. The website SmartAsset, linked below, shows that in DuPage county, the average tax rate is 2.114%, so if you’re purchasing a $500,000, the average tax bill is $10,570. Cook County’s average rate is 2.023%, so their average tax bill on a $500,000 home is $10,115. Go ahead and put your purchase price and location into that site, and it will tell you what the average tax bill is for that area at that price point.
Once you have your purchase price, down payment, interest rate, loan term, and property taxes, you’ll need to enter in the cost of homeowner’s insurance. There’s a lot that goes into determining your insurance amount, including your carrier, coverage, home features, location, deductible, and claim history, so it’s best to check with a provider to get a quote. The average annual premium on a $500,000 house is about $2,300/year, so you could use that for now or make it higher or lower depending on the amount of coverage you think you’ll need.
Once you have all of that, the only other factor is whether there’s a homeowner association fee. HOAs are most common with condos and townhomes, but some single family homes in the western suburbs of Chicago will have homeowner associations, too. The listing for a property will tell you the HOA amount, if any, and how frequently it is due. Most HOAs will collect fees monthly, but some will be quarterly or annually.
Putting it all together, here’s the payment calculation for a $500,000 home with a 5% down payment on a 30-year fixed mortgage with a 6% interest rate, an annual tax bill of $10,570 and $2,300 in homeowner insurance, and no HOA. The total payment comes to $4,181.61. That’s a principal and interest amount of $2,847.86/mo and $1,072.50/mo for property taxes and homeowner insurance. The principal loan amount is $475,000, and it includes $261.25/mo for PMI. It also shows that you would pay a total of $550,231.40 in interest, and $33,440 in PMI over the life of the loan, which it calculates will will need for 128 months based on a 5% down payment.
As you can see, calculating mortgage payments isn’t a simple matter of putting in your purchase price and down payment. There are a number of complex factors, and the home buying process includes a number of similarly complex steps, from finding a home, negotiating an offer, going through the inspection and escrow process, and closing. If you would like my guidance as you consider purchasing a home, reach out using my contact information, and if you found this video helpful, please like, share, and subscribe. I’m Eric with Andersen Realty Group, a family-owned brokerage where we treat our clients like family.