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Could a Mortgage Calculator Lead You to Your Dream Home?

Published October 17, 2019

4 minute read

By Jim Greene

Mortgage calculators are tools that help you wrap your head around buying a home. They will show you how much you can afford to spend on a home and how much your payments will be. They are very useful when you’re starting the home shopping process, or if you’re still looking around for mortgage pre-approvals. You’ll be able to proceed with confidence knowing you’ve got an accurate estimate of your upper price limit.

While exact functionalities vary depending on the calculator’s precise application, most calculators deliver a similar set of core features. You can also take advantage of specialized calculators with advanced functions. More on them shortly, but they can provide precision insights that can help you figure out how to finance the home of your dreams.

The Three Standard Features

Standard mortgage calculators deliver three main features. The first such feature lets you enter your down payment amount. Some calculators alternately configure this as a loan amount, which represents the purchase price of your home minus your down payment. You can tinker with different options to see what your payments would be like if you offered 5% down, 10%, or another valid amount.

Next, you’ll provide the length of your mortgage repayment term in years. The shorter your term, the higher your payments will be, but the less you will pay in interest. Most people opt for longer terms (20 or 25 years) to keep their monthly costs as low as possible. Like the down payment section, you’ll be able to try out different approaches here to find your sweet spot. Maybe you can actually afford a 15-year mortgage and be debt-free earlier than expected?

The third core function considers the mortgage’s annual percentage interest rate. You’ll have to do a bit of research to utilize this feature correctly, since rates change with general financial market conditions. Shop around online to see what kinds of rates major banks and mortgage lenders in your area are charging. If you’re pre-approved for a mortgage, you may already know your interest rate.

Specialized Mortgage Calculators

Standard mortgage calculators are useful, but they have limitations. For example, if you’re considering a variable rate mortgage, you would have to manually enter differing interest rates to see how shifting rates will affect your payments. You’ll also have to do a lot of engineering if you want to work backwards to determine how much monthly income you would need to buy a home in a certain price range.

If you need to perform computations not supported by standard mortgage calculators, you can seek out specialized alternatives including:

Adjustable Rate Mortgage Calculators

These calculators offer more detailed input options for adjustable rate mortgages, helping you get an accurate picture of how fluctuating interest rates will affect your payments.

Biweekly vs. Monthly Mortgage Calculators

You can pay off your mortgage faster and save thousands of dollars in interest charges by opting for biweekly rather than monthly payments. This type of calculator offers side-by-side comparisons to help you see the differences.

Mortgage Payoff Calculators

These calculators let you enter different biweekly or monthly payment amounts to see how quickly you’ll be able to pay off your mortgage at various payment levels. Some include options for lump sum payments too, if you happen to come into some extra money and want to use it towards your mortgage.

Required Income Calculators

If you’re not sure how much monthly or annual income you would need to comfortably afford a home in a certain price range, this calculator will tell you. This is a great tool for first-time buyers.

Balloon Mortgage Calculators

Balloon mortgages require borrowers to pay down the principal in larger lump sums, then finance the balance through interest-heavy payments. They can help you save money, and balloon mortgage calculators let you perform instant comparisons.

Mortgage Refinancing Calculators

If you already own a home and you’re thinking about refinancing your mortgage, this calculator will help you pinpoint how and when you will break even on the deal. You will need to have some existing equity in your home in order to refinance, though.

There are also calculators that can help you figure out your home ownership-related tax credits and tax savings. Other kinds of calculators exist too. Interest-only calculators will guide you to interest savings. Some calculators let you directly compare the terms of two or more mortgage offers. If you’re a renter and you’re not sure whether it makes more sense for you to buy a home, you can also use a Rent vs. Buy calculator to determine which option is best for your financial situation.

How To Get The Most Out of Your Mortgage Calculator

For more accurate results, use mortgage calculators designed for consumers in your area. Different jurisdictions have different rules regarding mortgages, especially when it comes to maximum terms. For instance, 30-year mortgages may not be permitted where you live. So using a calculator that allows you to determine payments over a 30-year term won’t be of much use to you.

Similarly, you can look for calculators that also also cover estimates for home insurance and taxes. Again, these factors will heavily depend on where you live, giving you another reason to choose calculators intended for your area.

Final Thoughts

While mortgage calculators are very helpful tools, keep in mind that they only provide estimates. Many other factors will come into play over the life of your mortgage. Economic upturns and downturns, changes to your income level, and other unexpected occurrences (both good and bad) could affect your financial situation, and therefore your ability to pay the mortgage. Use calculators simply as a way to guide your home and mortgage shopping. Remember that it’s always wise to build contingencies into your financial plans.

Mortgage calculators also can’t anticipate certain technicalities that may be built into the terms and conditions of your mortgage. For instance, some lenders will penalize you for paying off the mortgage early. Meanwhile others actually encourage borrowers to accelerate their repayment schedules. Always make your final determinations based on information from your lender rather than the generalized estimates offered by mortgage calculators.

Woman Filling Out Online Mortgage Application


Jim Greene


Jim Greene is a freelance writer based in the Toronto, Canada area. He has been writing professionally since 2001 and has an extensive professional background in consumer research, personal finance and economics.

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