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Understanding how a mortgage works is essential for identifying how much monthly payments will be and giving you a clear indicator of the affordability of a loan.

If you have a good understanding of your finances, using a mortgage calculator helps you to determine which houses are in your budget and prepare to make the move into home ownership.

This article will identify the main benefits of using a mortgage payment calculator when planning to buy a house and explore the range of mortgage calculators that First Merchants has created for buyers in different situations.

What is a mortgage calculator?

A mortgage calculator is an online tool used to estimate a buyer's monthly loan payments on a house by entering information such as the purchase price, downpayment, interest rate, and the length of a mortgage. Calculators also allow a buyer to adjust things like the duration of the loan and the down payment amount to explore how changing these factors would impact monthly payments.

Whether wondering about purchasing your first home, planning to sell a house, or looking to refinance your mortgage and unlock equity, First Merchants has a specific mortgage calculator to answer each of your mortgage-related questions.

4 reasons why you should use a mortgage calculator

1. To help determine your budget

For many people taking out a mortgage is one of the biggest financial decisions they will ever make. But mortgages can be complicated, and nobody wants to blindly commit to monthly payments they might struggle to afford.

Rather than jumping into the process with no preparation, using a mortgage calculator can help you to develop a solid understanding of what is affordable in your current situation.

With these estimates in mind before you start looking for houses, you will be better able to assess different loan packages and find a deal that aligns with your financial situation rather than risk getting an unwelcome surprise later in the process.

2. To calculate a suitable down payment

Choosing the right amount for a down payment is one of the most impactful ways a buyer can adjust the terms of a loan to their benefit. Interest is calculated each year based on the remaining principal loan left to pay, which means that a larger down payment at the start of the agreement can often shorten the duration of the loan agreement or reduce monthly payments.

Many buyers, particularly those who are purchasing their first home, may not have a lot of cash available for a large down payment. Using a calculator will help them to understand the impact of different down payment amounts on their repayment plan and identify the sweet spot for their circumstances.

3. To allow experimenting with variables

The early stages of researching a mortgage are the perfect time to test variables to understand the range of your budget. Using a calculator to experiment with adjusting interest rates, repayment terms, and down payments will help you to understand the extremes – what is the soonest you could pay off the loan? What could happen if interest rates were to shift significantly?

Having these ‘what ifs’ answered quickly and easily helps you understand your budget’s flexibility before starting the homebuying process--even those with no mortgage know-how can become familiar with how variables impact each other.

4. To compare different loan types

One of the reasons a mortgage calculator is so useful is the ability to easily make side-by-side comparisons of different loan offers. Would you be better off with a longer loan term or a lower interest rate? While a 30-year fixed-rate mortgage will result in a cheaper monthly payment, shorter terms will save you interest and be paid off sooner.

Calculators help you to turn all these considerations into tangible monthly payment estimates that are much easier to assess.

Which type of mortgage calculator is right for me?

From first-time buyers to those refinancing an existing loan or comparing fixed and adjustable rate mortgages, First Merchants offers a wide range of mortgage calculators for the different scenarios and circumstances potential buyers may experience.

Mortgage payment calculator

The mortgage payment calculator will estimate how much mortgage you can afford and what you’ll owe each month based on a fixed interest rate.

Rent or buy calculator

Renters often want to buy eventually, but is this the right time? The rent or buy calculator will factor in tax and rental rises to estimate the cumulative costs and determine if and how much money could be saved in the long term when buying compared to renting.

Home affordability calculator

To decide how much of a loan will be made available to you, lenders will review your finances based on three ratios:

The home affordability calculator gives you an indication of what your maximum loan amount is likely to be.

Compare mortgage loans

Choosing the correct mortgage deal is a big decision. The mortgage loan comparison calculator allows you to put the fees, interest rates and charges of two different lenders head-to-head to rapidly identify which provides the best offering.

Biweekly mortgage calculator

A popular method for paying off a mortgage sooner and balancing the payment amount across more paychecks is to switch payments from monthly to bi-weekly. Over the course of a year, this equates to an additional monthly payment, which can reduce both the term and amount of interest that needs to be paid.

Is this payment method right for you? Find out using the bi-weekly mortgage calculator.

Debt-to-income ratio calculator

Your debt-to-income ratio (the percentage of your gross income used to pay your mortgage and debts) is a major factor when banks consider your loan application. Find out if your debt load is manageable with our debt-to-income ratio calculator.

Calculate down payment on a house

A down payment is a single payment made at the start of a loan. This amount will lower the remaining repayment total, making monthly payments cheaper and reducing the amount of interest that needs to be paid. Use a down payment calculator to find out how your down payment will affect your repayment plan.

Mortgage loan calculator

Based on the term of the loan, down payment, and interest rate, a mortgage loan calculator estimates what percentage of your monthly payment is going towards paying the principal & interest and how much is going towards insurance, taxes and other charges.

Adjustable-rate mortgage calculator

An adjustable-rate mortgage uses current interest rate prices, meaning that your monthly payments could vary depending on the trend of interest rates. If rates drop, so will payments--but buyers on an adjustable-rate mortgage must also be prepared for their monthly bill to increase.

Using an adjustable rate mortgage calculator allows you to test different scenarios to find out if this type of mortgage is right for you.

Home sale proceeds calculator

There can be a lot of hidden costs when selling a house that rapidly reduce the seller’s proceeds if they are not anticipated – mortgage repayments, taxes, fees, and interest. The home sale proceeds calculator will give you a good estimate of the potential returns available and help you to determine if now is the right time to sell.

Home refinance calculator

If you have been locked into your mortgage agreement for some time, and would like to make improvements, it could be worth considering refinancing. When you refinance, you can take some cash out of the equity out of your home or simply secure a lower mortgage rate. The home refinance calculator will estimate the financial benefit of switching to a new loan and how long it will take to break even on the costs of closing your original agreement.

If you decide against refinancing, consider applying for a Home Equity Loan (HELOAN) or a Home Equity Line of Credit (HELOC).

Home closing costs calculator

The final stage of buying a house is called closing and, like most other stages, it has its own set of costs. A home closing costs calculator will help you to estimate how much these fees, taxes and commissions will cost.


Are mortgage repayment calculators accurate?

Although we provide the most accurate calculations possible, no mortgage calculator can accurately reflect the amount you'll be able to borrow as there are many personal factors, like your individual salary or debt, that influence your real-world ability to borrow and repay.

Mortgage calculators are only intended to provide rough estimates to help borrowers understand how different scenarios could apply to their financial situation. To get an accurate quote for your mortgage, schedule an appointment with our experts.

Should my mortgage be based on my salary?

A common method used by lenders is to consider your potential monthly payments as a percentage of your salary to ensure that you will be able to keep up with payments should rates rise in the coming years.

When using a mortgage calculator, you should also base your estimates on your salary to ensure it would pass affordability checks if it were to be used in an application.

There are several ways to determine the ratio or percentage of your salary that should go towards your mortgage payments. Three popular models suggest:

  • Spending 28% or less of your monthly gross income on your mortgage payments
  • Spending 25% or less of your post-tax income on monthly debts.
  • Spending no more than 35% of your pre-tax monthly income on paying debts.

Ultimately, the amount you can afford will depend on your personal financial situation. Use First Merchants’ mortgage payment calculator to help you determine how much you can afford.

Is it beneficial to pay a lump sum on your mortgage?

If you are able to pay a lump sum toward the principal of your mortgage, it could shorten the amount of time it takes to pay off the loan and reduce the amount of interest that you need to pay.

Our mortgage payments calculator can give you a good indication of how a lump sum could change your loan payoff schedule.

Start your mortgage journey with First Merchants

Check rates, find online calculators and get advice from our online mortgage center before applying for your home loan.

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