A guide to mortgage calculators
To get a clear picture of how a home purchase impacts your finances, you’ll need to determine what purchase price you can afford and how it affects your housing costs. Fortunately, mortgage calculators let you model this information, helping you make sound financial decisions about what will likely be the most important purchase of your lifetime.
Why should you use a mortgage calculator?
You wouldn’t buy a car without knowing what the monthly payment is, and you shouldn’t buy a home without an accurate idea of how it will impact your finances, either.
Owning a home involves more than a monthly mortgage payment, and mortgage calculators can help you figure out these extra costs, such as property and land transfer tax, insurance and utilities. This information can help you build a budget and ensure your other financial priorities (like paying off debt and saving for your future) remain on track.
Finally, some mortgage calculators let you model different scenarios based on purchase price and location, down payment amount and amortization period. Playing with these variables will illustrate how you can save money on your house before contacting a lender.
How to use mortgage calculators
Not all mortgage calculators are the same. Good ones will help you understand the true costs of home ownership—such as how much you can expect to spend on property taxes and utilities—so that you can plan accordingly. Here are the common types of calculators, along with a brief explanation of how they can help you plan your home purchase.
Mortgage affordability calculator
A mortgage affordability calculator (also called a mortgage pre-approval calculator) determines the maximum home price you can afford according to your annual income, debts, other living costs and the location of your future home.
See the MoneySense mortgage affordability calculator.
Mortgage payment calculator
A mortgage payment calculator estimates your monthly mortgage payments based on the purchase price, amortization period, down payment and interest rate. The best ones also help you estimate your total housing costs, including property taxes, insurance and utilities, taking even the purchase location into consideration.