A mortgage calculator is a budgeting tool, not a lender quote. Start with a possible loan balance, term and interest rate. Then add the other housing expenses before deciding whether the result fits your budget.
Use the payment formula
Enter your own loan amount, interest rate and number of payments from a written Loan Estimate. Use the same assumptions when comparing offers, and check the result against the payment stated by the lender.
The standard amortization formula is M = P × r × (1+r)n ÷ ((1+r)n − 1). Here P is the loan amount, r is the annual interest rate divided by 12, and n is the number of monthly payments. Convert the annual rate from a percentage to a decimal before dividing it by 12. M is the monthly principal-and-interest payment.
Build a complete housing budget
Principal and interest are only part of the cost. Add property taxes, homeowners insurance, any mortgage insurance and association dues. Keep a separate allowance for repairs and maintenance. The CFPB explains the difference between principal and interest and the total monthly payment.
Use local estimates and the property’s actual details when adding taxes and insurance; a seller’s current tax bill may not equal your future bill. Check whether these expenses are collected through escrow or paid separately.
Compare written offers
Keep the loan amount, term and loan type consistent when comparing lenders. Review the interest rate alongside points, lender credits, closing costs and cash needed to close. An APR includes certain borrowing costs, but it is not the interest rate to insert into the payment formula. Use the CFPB’s Loan Estimate comparison guidance to evaluate the full offer.
Next step: Visit RateZip’s mortgage rate comparison page as a starting point, then request personalized written estimates.
RateZip (Peklava LLC), NMLS #1592292. General education, not a loan offer or commitment.