Back to Basics: Mortgage and Refinance Calculators

While mortgage rates continue to stay low, plenty of people are considering taking the first steps toward buying a new home, or refinancing. In each case, low interest rates mean different things for different people.

How low rates could affect your refinancing and real estate options depends on a little math. While you could drag out a pen and paper, you can also just punch a few figures into a mortgage calculator to get a monthly payment estimate.

Calculating a home purchase

A monthly payment calculator is one version of a mortgage calculator. By putting in the price of the home and the down payment you expect to pay, you can get a rough estimate of a monthly mortgage payment.

If you want a more exact amount, you can also add in property taxes, home insurance and — if the property has them — homeowner’s association (HOA) dues.

For example, a $300,000 house, with a 20 percent down payment of $60,000 will have a monthly payment of $1,151 with a 30-year-fixed rate mortgage, which is currently 4.036 percent.

Adding in taxes and insurance, the home payment will be $1,517, as seen below:

By playing around with different down payment amounts and types of mortgages, you can get rough estimates of homeowner monthly payments.

Calculating a refinance

One form of a mortgage calculator, a refinance calculator, doesn’t require a lot of work on your end but can give you enough information to start making the decision about whether to refinance, or not.

Before you use a refinance calculator, get a sense of the competing rates and fees from different lenders. (We suggest using the Zillow Mortgage Marketplace for a good, free comparison.)

Note that there is no such thing as a “no-cost” refinance; either the loan rate will be lower and the fee higher, or vice versa.

The screenshot below shows a possible refinance situation. The homeowner has $250,000 left to pay and 300 months (25 years) remaining on their mortgage. Their previous interest rate was 6 percent.

With a new interest rate of 3.875, even with fees of $6,791, the homeowner will save money on their monthly payment by refinancing if they plan on staying in the home longer than 16 months (1.3 years).

Once you find a few appealing mortgage rates and fees, you can plug those numbers in the refinance calculator to see if refinancing is the right decision for you.

Calculators aren’t the final answer

The final say on whether it is time to buy a home or refinance an existing one should not come from a calculator but depends on your specific financial situation. For more details on a home loan or a refinance, talk to a lender.