What a mortgage calculator can and can't do

Looking to buy or refinance a home? While mortgage calculators can give a general picture of what your monthly payments may be, every online tool has its limits.

As you consider buying a home or refinancing your mortgage, it’s likely you’ll eventually look for a mortgage calculator online. As with anything else, there are tons of search results. And as usual, only a handful are relevant or even useful.

We jumped into the deep end of those results, and here’s what we found.

Making the best use of a mortgage calculator

Some mortgage calculators are super-simple. Google’s is right at the top of the search results and is a typical Google tool: clean, easy to use and quick. Enter the home price, mortgage interest rate and mortgage term in years, and bam! Here’s your monthly payment. That’s OK for a high-level view of things. You may look at the resulting number, find it higher than you expected, groan and mutter, “Yeah, back to Facebook.”

But if the number seems doable, drill down a bit to get a better, more realistic number. That’s when you’ll look for a mortgage payment calculator that does a bit more. You want a calculator that allows you to estimate expenses that will likely figure into your monthly payment.

Most mortgage payments go beyond just principal and interest payments and include such outlays as property taxes, homeowners insurance and even homeowners association dues. There can also be monthly mortgage insurance if your down payment is less than 20%. Those costs can really add up, and including them in your calculations gives you a much better idea of what you’ll actually pay.

So now you’re getting a real-life look at the costs of homeownership. But it’s still just in the ballpark. Once you get deep into the mortgage loan process, you’ll see just how many variables there can be. Your interest rate could go up or down, for instance — maybe just a little, but still different than what you counted on. And you’ll have to shop for your homeowners insurance to really nail down the cost.

So run a bunch of different numbers. Aim high on the cost estimates on one pass, low on another, until you get a good range of possibilities.

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What a mortgage calculator can do

• A mortgage calculator can only estimate the monthly payment you’ll make. It will base that on the information you provide — or on what it can approximate, using somebody’s best guess.
• It can give you a starting point in the “how much house can I afford” conversation.
• It might persuade you to put more money down.
• It might motivate you to negotiate for a better interest rate.

What a mortgage calculator cannot do

• It can’t tell you exactly what your monthly payment will be. There are too many variables, and things change during the buying process.
• It can’t give you the exact amount of additional expenses that will be built into your monthly payment. Only the lender can do that.
• It can’t tell you — even if the monthly payment looks good to you — whether you can actually afford to buy a house. For that, you’ll need a real-life “how much house can I afford?” calculator.
• It can’t tell you if you’ll qualify for the interest rate you plugged into the calculator.
• It can’t tell you if you’ll get the rate you want with the down payment you’ve saved.
• It certainly can’t tell you if you’ll be able to find a house in the price range you’ve used.
• And it can’t tell you what kind of mortgage is best for you.

Next steps

If all of this calculating has gotten you fired up to buy a home, you may want to take it even further. Remember, a mortgage calculator can tell you only so much. Want to know if you’ll qualify for a loan? You’ll have to determine your debt-to-income ratio, check your credit score and see how much money you’ve got in the bank.

Or better yet, go talk to a lender or two and see what they think.

More from NerdWallet:
How much house can I really afford?
Compare mortgage rates
Find a mortgage broker

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick. This article first appeared in NerdWallet.