![]() Such is the case of the Zillow house below, where the current price of the home - $400,000 - is shown at the top of the page and an estimated monthly payment (with 20% down) - of $1,956 - is shown below it. Most mortgage calculators automatically assume and populate a 20% down payment when you click on a house or enter in a particular price. Most Mortgage Calculators Assume You’re Putting 20% Down To understand this in more detail, here’s a full breakdown of how some mortgage calculators (but not all) can be misleading for people trying to purchase a home. The reason they do this, it seems, is to channel users to a particular mortgage site - kind of like some form of advanced clickbait.Īnd again, they aren’t lying and their calculations aren’t necessarily incorrect, but they leave out some pretty important costs that could significantly increase monthly payments. This gives online shoppers a false sense of affordability, leading homebuyers, and especially first-time homebuyers, to think they can afford a pricey home when they probably can’t. Usually, mortgage calculators strategically leave out important costs and information, providing users with a best-case scenario. It’s important to remember that mortgage calculators as tools aren’t completely incorrect and they’re not trying to purposefully miscalculate your mortgage, but their estimates can be somewhat misleading. How Mortgage Calculators can be Misleading As explained below, mortgage calculators are never 100% accurate and homeownership isn’t as affordable as they make it seem. Unfortunately, however, this is far from the truth. So, to put homebuyers at ease, they provide mortgage calculators - easy, plug-and-play tools that make homeownership appear affordable. The last thing they want is for a potential buyer to be overwhelmed with sticker shock before even talking to a realtor. So while monthly payments can be pretty large sums of money, mortgage companies don’t want you to think that (at least not initially). That’s because mortgage companies, to include the ones that offer calculators, are in the business of selling homes. Most calculators, like those from real estate giants Zillow and Redfin, show you a pretty decent estimate of your potential monthly payments, but they don’t exactly include every expense or expand on the details of how they came to that estimate. “Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” Zillow says.Mortgage calculators are a great way to figure out if you can afford a home, but depending on which one you use, some may be more accurate than others. “When we forecast the evolution of the housing market over the next 18 months in the event of such a debt default, we estimate that existing home sales would fall as much as 23% relative to the no-default baseline forecast later this year, and that home values may be 5% lower at the end of 2024 than expected in the no-default scenario,” Zillow says.Īccording to Zillow, if mortgage rates top 8%, existing home sales would drop 23% from 4.3 million in April to 3.3 million in September. ![]() ![]() That would price a lot of buyers out of the market, and keep those who have been sidelined since rates went up last year on the outskirts. On a $600,000 home, after putting 20% down, the monthly payment at 6% would be roughly $2,878 (without taxes and insurance.) With the exact same circumstances but at 8%, the monthly payment would be $3,522. Let’s take a look at the difference between monthly mortgage payments at 6% versus 8%. ![]()
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