Mortgage Calculator - Tips To Avoid Miscalculating Your Mortgage

Use the correct mortgage rate.

No, it is not that you punched in the wrong numbers on the calculator that caused a mortgage error. The problem is that the advertised rate you may have seen was the absolute best available for which you may not qualify. Or, you may have calculated with a rate that is not offered with the mortgage program you wanted. For instance, that 4.25 percent mortgage interest didn't apply to the 30 year fixed mortgage you calculated. It only applied to the first few years of an adjustable mortgage loan. Be sure you use an accurate mortgage rate for the program and term of interest. Freddie Mac can be a good resource for the national average of delivered mortgage rates, not just the advertised rates.

Don't be PITIful.

PITI stands for principal, interest, taxes and insurance. While most mortgage calculators always figure the payments of principal and interest, they might neglect taxes and insurance costs in your monthly payment. This is up to you to find out these additional expenses. While you may be able to base the tax payment on the preceding owner's tax bill on the property, this might be inaccurate. Once you take over the property, new assessments may apply increasing your taxes or the preceding owner may have received exemptions for which you do not apply. Checking with the county property appraisal office may give you a better idea.

As far as insurance goes, talking with an insurance representative can give a good idea of the insurance payment to be included. In some regions, however, additional insurance for flood, earthquake or windstorms may be required. This will increase your costs even further if this is the case. Your insurance agent should be able to help you with this as well.

Add in ALL the costs.

Mortgage calculators are also unable to help you add all the other costs that will be included in the mortgage repayment. Obviously, closing costs and fees required to sign the mortgage will not be included. But these costs may affect the amount of your overall loan. For instance, may be you had $20,000 to place down on a $100,000 home, so you were going to apply for an $80,000 mortgage. However, the closing costs and fees cost about $5,000 which has to be taken away for the original $20,000 you had available. You had originally calculated a mortgage based on a loan amount of $80,000 but not $85,000. By not figuring in the closing costs, it affected you mortgage payment unexpectedly.

Also, the mortgage is now more than 80 percent of the home's value. That likely means private mortgage insurance (PMI) will be required. This is an added insurance premium tacked on to your mortgage payment each month that insures the mortgage for the lender in case of default. So, what started out as a reasonable monthly mortgage payment now has grown substantially due to PMI and additional monies added to the mortgage loan amount. This can be a serious error when calculating your own mortgage payment.

Lastly, some fees may never be realized until you're at the closing table. Maintenance fees for homeowners associations (HOA) can be a few hundred dollars annually. If these are not known about when you are deciding what you can afford, this unexpected surprise can be quite stressful.

If you are using a mortgage calculator to determine your range of home, be sure you indeed have a reasonable way to calculate all the costs and fees that may add to the simple principle and interest of a mortgage payment. Likewise, knowing what the actual mortgage rate will be and its term is crucial to obtaining accurate figures. Experts in the lending field or particularly a mortgage broker can assist you with these determinations if there is any question. The more you know, the more accurate your estimation can be. And this can help prevent any surprises at the closing table.