Mortgage Calculator

Figuring out the actual cost of a new home is difficult because there are so many moving parts: down payment, closing costs, interest rate, tax rate, and insurance premium. Each moving part is dependent on another part, and each is controlled by a different party. That’s why no one is able to give you the definitive answer to the million dollar question: how much will this cost?

This means that you, future homeowner extraordinaire, must take matters into your own hands! You are in the best position to coordinate across mortgage lenders, realtors, city hall, and insurance companies to figure out the real price tag on your new home. If this sounds overwhelming, fret not–there are lots of tools available to help.

Let’s think of the cost of a home as two components: (1) One Time (down payment, closing costs), and (2) Recurring (principal, interest, taxes, insurance, HOA). For a break-down of One Time costs, see my writeup on Affordability Tools. Below is some help for determining Recurring costs.

CNN Money has the best mortgage calculator I’ve found. It’s surprisingly difficult to find a clear, concise calculator that explains exactly what metrics are being used. Stick with this one, and you won’t be lead astray.

CNN Money Mortgage Calculator

This calculator is great because it clearly covers the four “PITI” elements that comprise your recurring monthly costs (and hence your monthly PITI party!):

P rincipal = payment applied towards the amount you borrowed

I nterest = interest paid on the amount you borrowed

T axes = real estate city taxes, which vary by location (and even by block!)

I nsurance = homeowner’s insurance

Important note: If you’re buying a condo or a home that is part of certain communities, you’ll also have to pay Home Owners Association (HOA) fees. These can be substantial, so be sure you understand what the HOA fee includes (for example, some HOAs cover property taxes), and factor this into your monthly cost.

Another important note: PMI is an important part of the equation. If you plan to put down less than 20%, be sure you understand PMI.