If you came looking for, or are in need of a mortgage calculator with taxes and insurance; you are in the right place, my friend. Look no further than a few more inches down your screen, and be immediately blessed by a mortgage calculator so powerful, it will even provide for you an estimate of the cost of your PMI and the amount of annual property taxes to be paid either once at the end of the year or make two half payments throughout the year.
What is PMI
PMI in real estate is an acronym for Private Mortgage Insurance. This can be thought about as an insurance policy on the mortgage amount.
PMI insurance is a tool that lenders use to protect themselves, not you, and their investment in lending to you based on the down payment amount in a conventional loan.
Typically, PMI is required by the lender when the amount of your down payment is less than 20% of the purchase price of the home.
FHA loans and first-time homebuyer programs are some of the most common and well-known adopters of private mortgage insurance, as required down payments almost always fall below the 20% mark.
5 Key Components of a Mortgage
The first key component of a mortgage is to establish a budget for your new home. This helps by allowing you to determine the total loan amount and set filters to start your home search.
To begin, the price of the home you can afford will be based on your income, monthly debt payment, credit score, and down payment amount.
A standard percentage that home buyers often hear is the 36% rule. This rule states that your debt to income ratio should be roughly 36% or less when applying for a mortgage loan.
To calculate your debt-to-income ratio, add all monthly payments, and divide by your pre-tax income. To make this a percentage, multiply by 100.
The number remaining is your debt-to-income ratio. By achieving the correct ratio, it lets your financial institution understand your financial capacity to pay your mortgage each month. The higher your debt-to-income ratio is, the less likely you will be approved for a mortgage loan.
The two most common types of loans offered are fixed interest rate mortgages and adjustable-rate mortgages (otherwise known as ARM’s).
Fixed-rate mortgages are the most common, being a mortgage with a set rate amount of interest that does not change throughout the loan’s life. This makes budgeting easy and predictable using the loan amortization schedule.
An adjustable-rate mortgage is a type of mortgage that changes the amount of interest, usually becoming more expensive over time.
After calculating the amount your debt-to-income ratio permits, you will then calculate the amount needed for a down payment.
The majority of lenders expect 20%, but there are always exceptions. For example, VA loans don’t require a down payment, and FHA loans allow as low as 3%.
Although it may seem appealing to many not to provide much of or any down payment, paying more initially will cause your mortgage payments to be lower per month (because you owe less due to the larger down payment).
The interest rate ultimately depends on the lender, your credit score, and your debt-to-income ratio. Assuming that your monthly income and credit score are reasonable, it comes down to the company lending you the money.
If you have no idea of what you would qualify for, you can always assume an estimated rate based on current rate trends.
The length of the loan will also affect any monthly payments. The longer the term of the loan is, the lower each payment will be, but you end up paying much more in interest over the life of the loan.
On the other hand, shorter terms mean higher payments but less interest and a less overall number of payments.
The two most common terms are 30-year mortgages or 15-year mortgages. To get the number of monthly payments, multiply the number of years by 12 (the number of months in a year).
Amortization is paying off debt over time in equal installments. As you begin paying, a percentage goes to the principal amount, and another portion goes to the interest owed on your loan.
Over time, the percentages change and vary with current market trends and economics. With mortgage amortization, the amount going towards the principal begins small and gradually gets larger.
Meanwhile, the amount going towards the interest slowly goes down. Your amortization schedule will show how much, per month, you are paying for the principal and interest over the entire term of the mortgage.
How to Calculate Mortgage Payments
There are a couple of different tools that make calculating a mortgage payment more accessible than ever.
The first method is by using an actual equation to solve the problem by hand. You can calculate the payment amount (excluding taxes and insurance) using the following equation:
M = P /
Although it looks confusing, the letters represent what you are going to put there. The P stands for the principal loan amount, I stands for monthly interest rate, and ‘n’ represents the number of months required to repay the loan.
So, you do everything in the brackets first, then raise those values to the nth power, and then multiply by I and subtract 1. The final step is dividing the first value from the second value to get the amount of your mortgage payment.
If math isn’t your thing, it’s okay! Many websites offer free mortgage payment calculators online. In fact, we do too! Just click here to navigate to the mortgage calculator on this page!
You type in the information to the mortgage calculator, and it does all the hard work for you.
Once you have calculated the monthly mortgage payment, you can add in monthly property tax and homeowners premium if you plan to add those.
Mortgage Calculator With Taxes and Insurance
How to Calculate PMI, Annual Property Taxes, and More
If paying a 20% down payment sounds overwhelming, there are options to get a home loan with less than that. Because of this unique situation, most, if not all lenders, would require you to pay for mortgage insurance.
This is known as private mortgage insurance or PMI. PMI protects your lender if you stop making your monthly mortgage payments. To calculate this, you need some information about your loan and an online calculator tool or the chart that every PMI lender provides.
You first need the amount you are spending on the home. Your best guess would be okay.
Next, you need the amount of the down payment you can afford. It would help if you also had the interest and mortgage insurance interest rate.
Finally, you need the loan term length. You can input these into an online calculator tool or reference the chart provided by the mortgage insurance company to find the amount owed.
Another bill that homeowners face is annual property taxes. Rather than just paying them when they’re due, it’s essential to understand how billers got the number in the first place.
This way, you can always ensure you are not being overcharged on your property taxes.
First, different properties have a variety of taxes assessed on the land and its structures.
Vacant land will have a significantly lower land value than a property that has recently been improved. If public services are more accessible or the property has the right location, then the land assessment could be higher.
The property value determines the amount taxed annually, so a higher value equals more money owed.
Tax assessors will value properties every one to five years. They compare similar properties, assess damages, and calculate the cost of repairs.
Annual property taxes are calculated using the value obtained from the assessor and multiplying it by the mill levy. The mill levy is the tax rate levied on your property value. One “mill” represents 1/10 of a cent. This means that for every $10,000 assessed value, one mill would be equal to $10.
Every tax jurisdiction in an area has its tax levy. Tax rates for each region are calculated separately, and then all the levies are added together to determine the mill rate for an entire area.
In general, the community has an impact on this. City, county, and school districts each have a say in establishing taxes against a property. Each separate entity calculates the amount of mill levy they require, and then they are tallied together for the total mill levy.
For example, imagine the total assessed property value within an area is 200 million. The county then decides it needs $2 million in tax revenues to complete a large construction project in the area. The mill levy would be $2 million divided by $200 million (1%).
Tax assessors are an excellent resource for any additional questions on how the mill levy is calculated.
Finally, there are a few different options if you don’t know how to begin getting a home loan:
- A Chase Home Lending Advisor is an available resource to determine what current mortgage rates you are pre-approved for.
- U.S. Bank has online tools boasting mortgage, home equity, deposit products, and credit products.
- Current refinance rates can be found just by searching online or asking a mortgage lender. That being said,
- Determining the home price at the beginning of your home search will be most beneficial.
With a set price range and understanding of the costs associated with buying a home, there will be no “let-downs” and only happy house hunting!
Mortgage and Loan Resources
- Mortgage and loan information from the Consumer Financial Protection Bureau
- Mortgage assistance from the Federal Housing Finance Agency
- HUD – Homeowner assistance with mortgage payments to help avoid foreclosure
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