For All Loans
Loan Amount: The amount you borrow.
Interest Rate: The annual interest rate the lender charges you for borrowing the money.
Fraction Helper: The Fraction Helper is optional. If you have been quoted an interest rate of, say, 6^{7}/_{8}, you could use the Fraction Helper to find out that ^{7}/_{8} is the same as .875. When you select a fraction from the Fraction Helper, the decimal portion of the interest rate is automatically changed to the selected value.
Extra Amount Each Payment: Adding a little extra to your payments can save big money, especially over long term loans such as home mortgages. Entering a number here lets you see how much you could save if you were able to consistently put that much extra into each of your payments.
Make Payments: Select how often you will make payments on the loan. The majority of loans have monthly payments, so monthly is pre-selected for you. However, this calculator is also able to handle weekly, biweekly (every 2 weeks - 26 payments per year), bimonthly (twice a month - 24 payments per year), quarterly (every 3 months), semiannual (every 6 months), and annual Payment Schedules.
Note:
If you choose bimonthly and print a Payment Schedule, the calculator will choose 2 days of the month to make payments. One of the days will be the day of the First Payment Date. The other day will be 15 days after that or before that, depending on how late in the month the first day is. For example, if the first payment is on the 20th of the month, the 2 payment dates will be the 5th and the 20th. If the first payment is on the 15th of the month, the 2 payment dates will be the 15th and the 30th. This calculator does not allow for payments on the 16th and 31st. It will choose the 1st and the 16th instead.
First Payment Date: This is the date your first payment is due. It is only used for printing the Payment Schedule. If you are not going to print a Payment Schedule, you can leave this blank. If you leave this blank and print the Payment Schedule, the calculator will assume the first payment is due today.
How many years to pay off the loan? Enter the number of years you will be making payments. Negative numbers are automatically changed to positive numbers. The number of months is automatically updated when you change the number of years. You can enter a decimal number of years - but if you do, it will be converted to a number of months, and the number of months will be converted back to a decimal number of years. So the decimal you enter may not be the decimal you get!
Example
If you enter 12.7 years, this translates into 152 months. 152 months translates back to 12.67 years, so 12.67 would be the number you get!
Or, how many months to pay off the loan? Sometimes it's easier to enter the number of months you'll be making payments. If you know this number, you can enter it instead of the number of years. The number of years is automatically updated when you change the number of months. The number you enter is rounded to the nearest whole number. Negative numbers are automatically changed to positive numbers.
For Home Mortgages
PLEASE NOTE: All mortgage calculations for this calculator assume a conventional fixed interest rate loan. For other mortgage types, such as adjustable rate mortgages (ARM's) or FHA loans, actual figures WILL differ, and you should use these results only as "ballpark" figures!
One of the most common uses for a loan calculator is to find out the payment you'd have to make on a home mortgage. For most people this is their largest budget item, so it is useful to know as precisely as possible what amount to budget for. The loan payment covers the principal plus interest amount for the home itself, but homes come with property taxes, and there is often mortgage insurance, and these two items are frequently bundled into the loan payment. You'll also need hazard insurance, which may also be bundled into your payments. Finally, townhome and condominium dwellers will have to pay association dues (the association dues may cover your hazard insurance). The portion of your payment that does not pay for principal and interest is deposited into an escrow account, and when payments are due, the mortgage company pays the bill from the funds in your escrow account. This calculator accounts for taxes, mortgage insurance, hazard insurance, and association dues, so there are no harsh surprises when you find out what you really need in your budget!
Annual Property Tax: Enter the yearly amount you can expect to pay for property taxes. Your realtor should be able to give you this information, as it is commonly a part of the MLS listing for the property. You should expect that over time your property tax will increase.
Annual Mortgage Insurance (PMI): If you paid less than 20% down on your home, you'll probably have to pay mortgage insurance. Enter the amount of mortgage insurance you will have to pay each year. Do not confuse mortgage insurance with hazard insurance! Mortgage insurance is something you pay for to protect the lender in the event you default on your loan. This may sound like a sweet deal for the lender and a raw deal for you, but in fact, mortgage insurance makes it possible for lenders to give you a home loan without requiring a large down payment. With conventional loans, you generally can cancel your mortgage insurance once you have paid 20% of the loan or you can show by a property assessment that you have 20% equity in your home. Once you have 20% equity, the lender has a pretty good chance of recouping their investment through a foreclosure sale if you default on the loan. The qualifications for cancelling your mortgage insurance may vary from these general rules, and the rules are different for FHA loans! Check with your lender for details, and plan to cancel it just as soon as possible. Apply the extra money to your loan payments, if you can, and over time you'll save a bundle in interest!
Annual Hazard Insurance: This is what you normally think of as your home insurance. It covers losses due to fires, storms, flooding, etc.
Annual Association Dues: If you are planning to purchase a townhome or condominium, you will have association dues to pay in addition to your other home-related expenses. Exactly what the dues pay for varies from development to development, but the following are typical: hazard insurance, major maintenance and repairs (roofing, siding, cement, asphalt, landscaping, swimming pools, nautilus equipment, playgrounds, tennis courts, etc.), lawn care, snow removal, management company fees, legal fees, and so on. Your realtor should be able to provide you with dues information.
Show me the Payment Schedule: The Payment Schedule is also known as an Amortization Schedule. If you are not an AOL user, the Payment Schedule is generated locally and quickly displays in a new browser window. If you are an AOL user, the Payment Schedule must be generated on our server, which takes a little longer. The Payment Schedule shows you how much of each payment goes to principal and how much pays interest to the lender. You'll be able to see how your loan balance declines. At the end of each year there's a summary showing totals for that year and totals for the life of the loan so far. To print the Payment Schedule on your printer, click "File" on your browser menu, then click "Print."
Frequently Asked Questions
How come the results on the calculator do not always match up with the totals at the end of the Payment Schedule?
The Calculator and Payment Schedule calculations are very different. The calculator simply plugs numbers into a formula and returns a result. The Payment Schedule has its own formula which is repeated for each payment. Thus, the Payment Schedule accumulates error as it goes along. The accumulated error results from the periodic interest rate, which is equal to the yearly rate divided by the number of payments per year. This can result in repeating decimals (e.g., 8% annually is .6666... monthly). Applying such a number to 360 separate calculations in a 30 year mortgage schedule accumulates error, compared to using it once in the formula calculation. For example, suppose your computer is able to store a maximum of 5 decimal places. Then monthly payments on an 8% loan would be calculated using .66667, which is just slightly too big, so a bit too much interest is shown by the end of the schedule. On a 4% loan, .33333 would be used, which is now just slightly too small, so a bit too liitle interest is shown by the end of the schedule.
Note: If at the end of a Payment Schedule there is a small amount of principal left over, presumably due to accumulated error such as described above, the Payment Schedule shows an extra line. On a 30-year loan with monthly payments, this would be the "361st payment." The Payment Schedule displays this extra line in italics so that you can see the principal add up to the loan amount.
On the Payment Schedule, sometimes the loan balance for one month does not equal the loan balance from the previous month minus the principal paid. It's off by a penny. What's up?
You can probably see the answer to this one coming a mile off: It's due to rounding error again. As the Payment Schedule is generated, results are displayed rounded to two decimal places, but internally are kept with more than 2 decimal places. For example:
Internal Display Previous Balance 1275.246 1275.25 Principal Paid -125.123 -125.12 New Balance 1150.123 1150.12 (Not 1150.13!)In the example, everything looks correct as you go from left to right: each number is rounded correctly. But in the Display column, the subtraction appears to be wrong! Don't worry though, the internal calculation is correct!
Legalese: This calculator is provided as a public service to all Internet users on an "as is" basis. Use it at your own risk! Although reasonable attempts have been made to ensure the calculator operates as intended, no warrant of any kind is made as to the fitness or suitability of the calculator for its intended purpose. Neither the author nor the web site owner shall be held liable for any failure of the calculator to perform as expected, nor held liable for any inability to access or use the calculator due to any communications failure, site down time, browser incompatibility, user misunderstanding, etc. This calculator requires a JavaScript-capable browser. However, no guarantee is made that this calculator will work correctly with any specific browser's JavaScript implementation. |