Mortgage calculators are useful, but they do have some limits. Learn more about how to interpret what a mortgage calculator tells you, and what you can do to get the detailed information you need to make a homebuying decision.

The Value of a Mortgage Calculator

Should you use a mortgage calculator? Yes! We offer a range of different mortgage calculators that our current and future clients can use to gain insight into everything from what their monthly mortgage payment might look like to a comparison between fixed and adjustable mortgage rates for the same loan amount. 

However, it’s important to put the information you get from a mortgage calculator into perspective. Like any other online tool, such as a symptom checker on a health website, mortgage calculators have their value, and they also have their limits. Calculator tools can help you get some good preliminary information, and they’re also useful for providing insight into the homebuying process, introducing you to some ideas you may not yet be familiar with. 

For example, if you’re just playing around with the idea of buying a house within the next year, a mortgage calculator can help you determine whether the monthly budget you’re thinking about is realistic. It’s a way of throwing out some numbers and having a reliable, accurate tool that takes complexities like interest rate into account.

Mortgage calculators are only as good as the information you give them, though. A lot of these calculators miss out on important elements like property tax, insurance and other costs that can have a huge impact on your monthly payment. If you’re going to use a mortgage calculator, make sure it asks for more information than just the loan amount, term and interest rate. Our Monthly Cost Calculator does take these elements into account, meaning your results will be more realistic than some other calculators.

Why Unique Details Matter (and How Mortgage Calculators Can Miss Them)

Even though calculators like ours are more detailed, there are still some things you may not be aware of that can throw a wrench in your plans. For example, your down payment and even the type of loan you ultimately get can have an impact on what’s included in your monthly payment. Some borrowers get loans that require private mortgage insurance (PMI), which adds cost to their monthly payment that other borrowers may not have to pay.

Additionally, factors like your employment status (whether you’re self-employed or not) and even a home’s location can impact your mortgage. Plus, you may have to take into account things that may not even be part of your mortgage cost but are still regular costs you’ll have to pay to as a homeowner. For example, the home you want to buy is on the banks of a river, you may need to buy flood insurance. Beachfront properties may require that you purchase hurricane insurance. A home in a subdivision with a pool and tennis court may come with homeowner’s association (HOA) dues and mandatory swim club fees.

There are other costs associated with buying a home that you should be aware of:

  • Closing costs – the homebuying process includes mandatory services like appraisal, and these services aren’t free. They’re typically built into the closing cost of your loan, meaning they become part of the total cost of your new home.
  • Fees – mortgage lenders all charge different fees to finance their services. These fees can include simple processing charges and others, like origination fees, that are a bit more technical and may not be immediately obvious to borrowers.
  • Taxes – most new homeowners have to pay government fees associated with transferring ownership of the property from the seller to the buyer. These fees are separate from property taxes, though both contribute to the cost of buying a home.

Even the most robust mortgage calculators can’t accurately account for all these subtle differences, which can vary not only from county to county but also from person to person. There are simply too many unique variables involved in each individual property purchase to build a one-size-fits-all tool that can accurately calculate monthly mortgage payments for every user.

The Solution? Calculate Monthly Mortgage Payments, Then Talk to a Mortgage Specialist

Due to these limitations, it’s important not to get too excited or discouraged by what your mortgage calculator tells you. If, for example, you use a calculator that gives you a monthly payment that’s out of your current price range, that doesn’t necessarily mean you’re out of luck. You may still be able to buy a home. On the flip side, if a mortgage calculator tells you that owning a home would mean a much smaller monthly payment than you’re currently paying for rent, that could be an unrealistically rosy forecast. 

Mortgage calculators’ biggest weakness boils down to the idea of nuance. Clearly, a calculator can’t understand nuance the way a person can. That’s why it’s so important not to make any final conclusions about homeownership without speaking with a professional first. When you say “how much house can I afford?” to a mortgage-industry professional, they can ask follow up questions and give you much more precise information than any calculator can.

We do encourage our clients to play around with mortgage calculators and experiment, but not to put too much weight behind their results. The best thing to do is to use a few mortgage calculators, learn more about your results independently, and then make an appointment with a Mortgage Specialist at your local Directors Mortgage branch

When you meet with a Mortgage Specialist, you get the opportunity to have an actual person listen to you and provide information based on the specifics of your situation. That’s something a calculator just can’t do for you. 

Another thing a calculator can’t do is help you get pre-approved so you have a specific budget you can work with while house hunting. That’s why you should see online calculator tools as one small step toward your ultimate goal of homeownership. When you’re ready to take a big step and drill down into specifics, we’ll be here to help.