Do you need to know what mortgage you can afford? What you need is to know how a mortgage is calculated. The solution is to use a mortgage calculator that will do the math for you.
What is a mortgage calculator?
The best mortgage calculators can tell you the loan amount and even the house you can buy.
These types of mortgage calculators start with the loan, not the house. This way, you'll have a clear budget before you start looking, or you can set more realistic goals if you're already in the process.
Let's see how loan interest works, the calculator, and what information you need to provide!
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Find out how much we can finance for you
- It's said that getting a mortgage is a slow process, but it turns out you can calculate yours in two minutes.
How are mortgage interest rates determined?
Mortgage interest rates represent the cost that the financial institution sets for providing the money needed to purchase a home. This cost is determined by considering various factors that vary depending on the type of loan and market conditions at the time of signing. There are two key indicators used to accurately analyze and calculate these interest rates:
- Nominal interest rate (NIR): This indicator shows the fixed percentage that the bank applies to the capital lent to the client. It is a basic value that does not include other expenses associated with the mortgage loan, such as fees, additional costs, or insurance, so it is not the most suitable for calculating the total cost of the mortgage or for estimating the monthly payments that the borrower will have to make over time.
- Annual Percentage Rate (APR): Unlike the nominal interest rate (NIR), the APR provides a more comprehensive view of the cost, as it incorporates not only the nominal interest rate but also other mortgage-related expenses, such as origination fees, property appraisal costs, mandatory insurance, and other applicable charges. For this reason, the APR is considered the most accurate indicator for assessing the true cost of a mortgage loan and for comparing the different options available on the market before making an informed decision.
Similarly, you can find more information about what TIN and TAE are in our dedicated post and thus resolve all your doubts.
Calculation of interest according to the type of mortgage
The total interest you'll pay on a mortgage varies depending on the type of mortgage you choose, because each one calculates interest differently. Below are descriptions of the three main types of mortgages based on their interest structure:
- Fixed-rate mortgage: In this case, the interest rate remains constant throughout the loan term.
- Variable rate mortgage: These mortgages are adjusted to a reference index, which in Spain is usually the Euribor, plus a fixed spread set by the bank.
- Mixed mortgage: This type of mortgage combines aspects of both fixed and variable rate mortgages. In the first few years, a fixed interest rate is established, ensuring constant payments; then, it switches to a variable interest rate linked to the Euribor, causing payments to fluctuate according to changes in this index.
How to realistically calculate your mortgage
Our mortgage calculator helps you quickly and easily discover the loan options that best suit your profile.
Through a series of key questions, we gather essential information about your personal, professional, and financial situation. With this data, we calculate the mortgage amount you could obtain and provide you with a clear overview of your options so you can make informed decisions.
Personal situation
To find out what mortgage you can get, we start with two key pieces of personal information: how many people will be signing the mortgage and whether you have dependents. Having more than one borrower with their own income on the mortgage is always a plus.
On the one hand, it allows you to borrow more money because your income is higher. On the other hand, it reduces the risk of default since there are two different sources of income.
And what about dependents? Knowing the number of family members helps us better estimate your monthly expenses. This way, we can better adjust the mortgage amount you can afford.
Employment situation
Permanent contract, temporary contract, self-employed... We're so nosy! In this section, you need to tell us about your employment status. This will help us understand the stability of your income, among other things.
Age
We know this question might raise suspicions, and no, we're not asking it because we're nosy.
Knowing your age allows us to adjust the loan term. In other words, the number of years the mortgage will last.
Income level
This section is key. To make it very easy for you, just tell us how much you earn per month (the money that comes into your account) and how many paychecks you receive per year. As you've probably already guessed, the higher your salary, the larger the loan you can access. It's that simple.
Are you paying off any other loans?
This is a standard question, as they say. If you have other debts, we only need to know the total amount.
This information helps you determine your debt level and adjust your mortgage accordingly. This way, you ensure your loans don't become an excessive burden on your finances. After all, a good mortgage should be a source of joy, not worry.
With this data, the tool itself will start working and you will know what house you can buy, among other things.
Are there other mortgage calculators?
Of course! The Bank of Spain itself has a tool that can help you and takes into account other factors such as the loan interest rate or the amortization period.
Its focus is more on how much you'll pay on your mortgage than on the mortgage you can get. Depending on what you're looking for, it can be a good complement to a mortgage calculator.
