Many first time homebuyers dive into the mortgage process without completing perhaps the most important critical FIRST step: Using a good online mortgage calculator prior to meeting with a bank or a loan officer.

A large percentage of those in the market for homes make it very simple for the mortgage brokers to steer homebuyers into accepting deals that are more beneficial to the broker than YOU, the buyer – AND IT’S NO WONDER!

Unsuspecting homebuyers lacking any grasp of how these loans actually work are overwhelmed with the process and terms. Points, principle, interest rates, interest only loans, ARM, FRM etc... can ALL be confusing.

Why not teach yourself the basics of home loans by using a good online mortgage calculator before you get involved and possibly enter into a loan with a broker or bank?

Online mortgage calculators are standard on most bank or realestate type websites and most are very easy to use. By truly understanding your financial capabilities, and learning some basic mortgage calculations can level the playing field and very possibly save you lots of money.

By learning how to use a basic mortgage calculator you can easily understand the basics of mortagage loans.

Online Mortgage Calculator –The Basics

Monthly Payment - Perhaps the simplest function of a good online mortgage calculator is finding out your monthly payment.

Here's what you need to input:
- The amount you want to borrow
- The interest rate of the loan
- The length of the loan - usually in years or months

All you need to do is type these numbers into the form and submit. The calculator will then process the three variables, principle, interest and length of loan and will return the amount you will pay monthly based on the criteria you entered.

For example: The amount you need to borrow, or principle is, $200,000 at 6% interest rate to be paid over 30 years – your monthly payment will be: $1,199.00 per month.

Analyze the Scenario

A good online mortgage calculator will not stop there...

Most programs also return a few other critical numbers, such as:

Total Amount the Borrower Will Pay

In our case above the total amount paid – interest and principal - by the borrower at the end of 30 years will be $431,640.

Total Amount of Interest The Borrower Will Pay

In our case above the total amount of interest the borrower at the end of 30 years will be $231,640 about 53% of the total amount spent is on interest.

Many are stunned at how this seemingly slight numeric change in interest rate can have such a major and powerful influence on the total amount paid over the life of the loan!

In the above situation, with a jump in interest rate to 7.5%, the total amount paid drastically increases – the total payment now is $503,280, with $303,280 going to interest only! The monthly payment would be around $1398.

Online Mortgage Calculators – Summary

Our simple example shows you how a 1.5% jump in interest rate will cost you big money, over 70 thousand dollars over the life of the loan!

Obviously you'll want the lowest rate when locking into a home loan. The online mortgage calculator arms you with critical knowledge prior to that initial meeting with loan officers or mortgage brokers.