When you hear the word “tools,” do hammers and nails come to mind? If so, you’re in good company! They’re important to a new home build, but here’s a tip: the first tool you should pick up when venturing into a custom home is a mortgage calculator. This simple step sets the foundation for a successful home ownership experience.
It’s a handy formula, sometimes coming in the form of an app or other online tool, to help you figure out how much your mortgage payments will be each month. Trilogy has our very own mortgage calculator you can use to plug in numbers and figure out what your mortgage would be based on what kind of house you’re building. It can also tell you how many payments you’ll make over the lifetime of the loan as well as how much interest you’ll pay.
In order to start your calculation, there are a few terms and amounts you’ll need to know. Be ready to plug in the numbers for your home value, down payment, loan amount, interest rate, property tax, PMI and HOA (if applicable) and the cost of home insurance.
Purchase price of the house - deposit = mortgage amount
This could be more if you’ve chosen to wrap up the closing costs into the mortgage.
Once you have the total mortgage amount, enter it into the calculator along with the interest rate and loan term (30 years, etc.) After plugging in these numbers, the app should give you a monthly payment amount for your mortgage.
Once you’ve calculated your mortgage, don’t forget about some of the other important costs associated with owning a home.
Here are some examples:
Private Mortgage Insurance (PMI): If you’re putting less than 20% of the purchase price as a down payment for your mortgage, your lender may require Private Mortgage Insurance, or PMI. PMI is a payment wrapped up in the mortgage that protects the lender in case the borrower defaults on the loan.
Property Tax: This is the amount you’ll owe the local government each year for owning the property. Some mortgage companies will include this wrapped up in your mortgage so you don’t have to pay it separately.
Homeowner’s Insurance: You’ll be required to choose an insurance provider for your property whether you live in it full-time or not. Many mortgage companies can include this in your monthly mortgage payment and remit it to the insurance company on your behalf.
Homeowners Association Fee (HOA): If your new property is located in a development, you may have to pay a Homeowners Association Fee, which covers expenses like landscaping, property upkeep, etc.
The bottom line: check with your mortgage provider to find out more about which of these are included, as they could significantly increase your monthly payment.
If you’re trying to decide whether to buy or build a new custom or semi-custom home, Trilogy can help you with this important decision. Contact us for assistance!