[1] Purchase Price (Value): This calculator assumes that the purchase price of the home is the same as the appraised value of the home.
[2] Down Payment: The portion of the purchase price that the buyer pays up front in cash, which is not included in the mortgage loan. A larger down payment generally means a lower monthly payment and less total interest paid.
[3] Length of Mortgage (Term): The period of a loan, usually measured in years. Mortgage loans are usually 15 or 30 year periods.
[4] Annual Interest Rate: This calculator assumes a fixed annual interest rate. If the annual rate is 7%, then the monthly interest rate is 7%/12.
[5] Property Tax: (Real estate taxes) Annual property taxes are often based on a percentage of the property value. The average is around 1.8%, but you should call your Tax Collector's office in the city where you plan to buy the home for more information.
[6] Homeowners (Property) Insurance: This type of insurance is meant to cover the dwelling, personal property, personal liability, etc. (depending on your specific policy). The annual cost of homeowner's insurance is often estimated as a percentage of the property value, averaging about 0.4%.
[7] Private Mortgage Insurance (PMI) Many lenders require PMI when down payments are less than 20 percent of the purchase price.
[8] Maintenance: This includes repairs such as fixing plumbing, painting, or paying to have your lawn mowed and weeds pulled. When selling your house, maintenance costs are not tax deductible.
[9] Improvements: Although you might not spend this amount each year, improvements such as roof replacements, remodeling, additions, etc. need to be budgeted. Money spent on some improvements (particularly those that permanently increase the value) may actually be tax deductible when selling the home, so keep receipts.
[10] Combined Fed/State Income Tax Rate It may be possible to realize deduct mortgage interest and property taxes on the homeowner's tax return. Consult with an accountant to determine what your tax rate will be and whether deductions will be possible. For 2005, the six federal income tax rates are 10%, 15%, 25%, 28%, 33% and 35%. Also add your state income tax rate.
[11] Mortgage Payment: Consists of both principal (P) and interest (I). Derived from the amount borrowed, the term of the loan, and the mortgage interest rate.
[12] Housing Expense (PITI): The housing expense usually paid to the mortgage lender, consiting of Principal, Interest, property Tax, and Insurance.
[13] Monthly Mortgage Interest: The is the approximate monthly interest paid. With most mortgage loans, you will be paying less interest each payment. So, this estimate only accurate for the first few mortgage payments.
[14] Monthly Tax Adjustment: When mortgage interest and property tax are deductible, the monthly tax adjustment can be estimated by multiplying the tax rate by the mortgage interest and property tax. Keep in mind that you don't usually see these benefits until you file your tax return. Important: Having a mortgage does not mean that itemizing deductions is better than taking the standard deduction. You should run your taxes both ways to determine which way will give you the larger return.