You already know your mortgage rate is important — a higher rate means a higher total amount paid over the course of the loan — but that same mortgage rate can really impact your monthly payment, too.
That makes knowing your monthly payment amount all the more important. Take a look.
When you’re calculating your monthly payments, you need a minimum of three figures to get started:
The sale price will be the total price of the home. If you’re shopping online, use the list price. If you’re considering making an offer, use that figure. Next, the payment calculator needs to know how much of that value is going to be financed through a lender. Some ask for the loan amount, others ask for the dollar amount or percentage of your down payment. The third piece of data is the expected mortgage interest rate. Important: Don’t mix up APRs with interest rates. Since the add-ons for APR offers can differ from lender to lender, use the expected interest rates. The result will be your expected monthly mortgage payment — principal plus interest — for your loan.
Now that you have a baseline monthly payment estimate, feel free to start playing with these variables. Notice how it affects that monthly payment.
The less expensive home with lower loan principal, still has a monthly payment that’s $66 higher. Over 30 years, that does add up.
The bulk of your monthly payment is going to be the principal and interest you’ve just calculated. But don’t forget about other fees that typically get included with your mortgage payment:
If your home will be in a neighborhood with a homeowners association than HOA fees will need to be added.
Whatever home or loan you end up choosing, make sure you’re comfortable with that monthly payment and the other costs of owning a home.