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Mortgage Q&A: Are Online Mortgage Calculators Accurate?

We’re used to finding answers to just about anything with our handy smartphones and an internet connection. But just because the information is at our fingertips doesn’t mean it’s completely accurate (a fact that’s so easy to forget!). When it comes to the mortgage loan process, you can do plenty of homework online. And it’s safe to bet that somewhere in your research, you’ll end up plugging numbers into a mortgage calculator. But are online mortgage calculators really accurate?

Online mortgage calculator

The Ups & Downs of the Online Mortgage Calculator

Unfortunately, not all mortgage calculators are created equal. If you’re trying to get an idea of what a monthly payment might look like, it’s important to be clear on the figures you’re calculating first. With that in mind, any mortgage calculator you decide to use should ask for the following information:

  • Principal
  • Interest
  • Taxes and insurance
  • PMI
  • HOA dues

These are all real costs that will affect your monthly payment. In fact, in some cases, costs like homeowner’s insurance, mortgage insurance, and property taxes can nearly double a housing payment. Imagine that!

A bare bones mortgage loan calculator, which will ask for principal, interest, and the number of years, will spit out a number that may be somewhere in the ballpark if you have no impounds and you’ll be paying insurance and property taxes separately. But for most people, it’s essential to factor for all costs to get a realistic figure. Many mortgage calculators just aren’t set up to accommodate that.

In general, online mortgage calculators tend to underestimate the cost of taxes and insurance, and sometimes significantly. It’s also important to recognize that many of the calculators advertised in banner ads or on social media typically showcase the lowest possibly monthly payment (usually just principal and interest). Approach these as you would any kind of click-bait, and take any generated information with a big grain of salt.

If you’re still curious to see where the numbers come out, a best practice is to compare results from a few different mortgage calculators. If you notice a big discrepancy after plugging in the same information, the culprit is likely to be underestimates on property taxes and homeowner’s insurance.

The Biggest Drawback

Shopping for a new home with inaccurate payment estimates can mean big problems down the road. Unfortunately, you may find out that you don’t qualify for either the loan or the house after you’ve mentally moved in. Worse, you could qualify for a loan that you later realize you simply can’t afford, all because your estimate was off.

Here’s the Good News

You don’t have to rely on an iffy online mortgage calculator to get real numbers. Like all mortgage brokers and lenders, the Cushing Team here in Reno is legally required to give our borrowers a loan estimate form, which includes estimated taxes and insurance in addition to interest and principal payments. You should get the loan estimate within three days of submitting your application, but keep in mind that it is just an estimate, and your actual payment won’t be determined to the final cent until closing.

All in all, if you’re serious about buying a home, a lender’s loan estimate will give you a more accurate figure than just about any online calculator. The fact it, mortgage calculators don’t steer you wrong because they miscalculate. But because they can’t factor for everything, they’re misleading at best.

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6990 South McCarran Blvd., Suite 200 Reno, NV 89509