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Which Mortgage Calculator Should I Use to Calculate My Monthly Mortgage Payments?

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Choosing the right mortgage calculator is very important to correctly estimate your monthly mortgage payment. Unfortunately, most mortgage calculators available in search results are not very accurate and, to be blunt, pretty useless. Don’t believe me, just watch!…sorry Bruno Mars. Let’s look at an example.

Katie currently rents an apartment in the city for $1,200/month. She and her husband Mark want to buy a home to raise a family in and think they can afford a house in the $250,000 range.

They know that their monthly payment cannot be higher than $1,500. They also know that there is a high possibility that Mark could get transferred for work within the next five years. They’ve made a point of saving as much as possible for a down payment and figure they can afford to put down 5%, or $12,500.

  • Current Rent Payment: $1,200
  • Prospective Home Value: $250,000
  • Down Payment: $12,500
  • Maximum monthly payment they can afford: $1,500
  • Time expected to stay in the home: 5 years or less

How much can Katie and her husband expect as their total monthly mortgage payment?

There are a number of online mortgage calculators that Katie can choose to estimate her monthly mortgage payments, however the vast majority of calculators don’t include key factors that greatly affect accuracy.

What should you look for in a mortgage calculator to make sure you’re getting an accurate estimate of what you’ll be paying in monthly mortgage payments? Generally, there are three questions you should ask yourself, which we consider requirements for an accurate calculation:

  1. Does the calculator take into account the principal, interest rate, taxes, homeowners insurance, and mortgage insurance (PITI)?
  2. Does the calculator let you compare between Fixed Rate and Adjustable Rate mortgages?
  3. Does the calculator include up-to-date mortgage interest rates that reflect current market rates?

Let’s choose the fifteen most popular online mortgage calculators (based on Google search results) and assess whether they pass or fail these three requirements, and how each would affect Katie’s monthly payment estimate:

PITI

Katie and her husband might be tempted to think “Ok, we currently pay $1200/month for our apartment in the city, so if we get a 4.51% interest rate on the $237,500 loan we’ll only be paying $1,205/month…we can afford that, and we’ll be building equity!”

If only it were that easy.

The $1,205 only accounts for the principal and interest, however she’ll also have to add in taxes, homeowners insurance, and private mortgage insurance.

Let’s assume the same principal and interest rate on a 30-year fixed mortgage, but add in the rest:

  • Home Value: $250,000
  • Down Payment: $12,500
  • Interest Rate: 4.51%
  • Principal and Interest: $1,205
  • Property Taxes: $3,000/year
  • Homeowners Insurance: $900/year
  • Private Mortgage Insurance: $1,800
  • Total Monthly Payment: $1,680

Which of the fifteen most popular online calculators factor in PITI?

Pass

Fail

Zillow MortgageCalculator.org
CalcXML Bankrate
Lending Tree Mcalc.com
Trulia MortgageCalculator.net
MortgageHippo CNNMoney
Bloomberg
Yahoo Homes
Mortgage-calc.com
Interest.com
QuickenLoans

If Katie would have used one of the mortgage calculators in the fail column, she would have started shopping around online for a home in the $250,000 range thinking that she could afford the monthly payment.

Clearly that is not the case. Katie would have lost valuable time looking at pictures of different homes, making lists of must haves and maybe driving around with the real estate agent, looking at homes she can’t afford.

ARM vs. Fixed

Now that Katie and her husband have an idea of the full amount they’ll expect to pay in monthly mortgage payments, they should be all set…right?

Not so fast. Katie and Mark know that he might get transferred in 5 years or less. If so, they might be better off applying for an adjustable rate mortgage (ARM) rather than a 30-year fixed rate to take advantage of a lower initial interest rate.

Let’s assume the same PITI numbers used above, but this time on a 5/1 ARM with a lower interest rate:

  • Total Monthly Payment (30-year Fixed at 4.51%): $1680
  • Total Monthly Payment (5/1 Adjustable at 2.77%): $1497

Which of the remaining five online mortgage calculators allow Katie to compare loan programs such as Fixed vs. ARM?

Pass

Fail

Zillow CalcXML
MortgageHippo Trulia
Lending Tree

All of a sudden, Katie and Mark realize that maybe they can look at a $250,000 home after all.

Now the decision for them gets a little bit more difficult: “do we get a 5/1 ARM on the $250,000 home and pay the $1,497 a month or do we go for a 30 year fixed and look at a lower priced home (let’s say $225,000) so that the monthly payment fits within our budget? At that point it becomes a question of risk tolerance.

Interest Rates

Although Katie and Mark now have a better sense of what their total monthly mortgage payment will be, and are able to compare different loan programs based on their personal situation, their estimated monthly mortgage payment still may not be as accurate as they thought. Why?

Let’s say that Katie used one of the two surviving mortgage calculators: Zillow.

Zillow doesn’t really provide accurate, up-to-date mortgage interest rates. What Zillow does is take an average rate based on the results of their own mortgage marketplace.

This may be inaccurate because their mortgage marketplace offers many loans with discount points and lender credits that may not apply to you. They also assume that you have a credit score between 720 and 739.

For example, as of today (11/14/2013) Zillow is showing a 4.128% interest rate when the current market rate is 4.38%

Their mortgage calculator lets you play around with the interest rate, but what if Katie doesn’t know the current market rate?

If Katie isn’t certain exactly what her mortgage rate will be, her monthly mortgage payment estimate might be way off.

Which of the remaining two calculators factor in market interest rates based on your current credit score?

Pass

Fail

MortgageHippo Zillow

*  *  *

As you can see, figuring out what you can expect to pay in monthly mortgage payments requires a lot of assumptions and calculations on your part.

But what if you don’t want to do all the math. What if you don’t want to be a mortgage expert just to get a great loan for you and your family? Aren’t mortgage calculators supposed to do all the work so you can kick back and think about where your flat screen is going to go?

We think so, and that’s why we made sure our mortgage calculator includes all of the requirements outlined above.

Not only does MortgageHippo provide the most accurate monthly mortgage payment calculation, we use these calculations to recommend loan offers that best fit your personal needs.

What’s the worth in using mortgage calculators that rely on defaults, incomplete information, and a lot of work on your own part?

P.S. – Go for the LED.

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