What is a Mortgage Home Loan Prequalification Calculator?
A Mortgage Home Loan Prequalification Calculator is a financial tool that helps potential homebuyers estimate their prequalification for a mortgage loan. By inputting loan details, you can get an idea of how much you may be able to borrow.
Formula for Mortgage Prequalification Calculation
The formula for calculating the future value of a loan is:
\[FV = P \times (1 + r)^n\]
Where:
FV = Future Value
P = Principal Loan Amount
r = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Monthly Payments (Loan Term in Years × 12)
Calculation Steps
Calculate the monthly interest rate by dividing the annual rate by 12.
Determine the total number of monthly payments by multiplying the loan term in years by 12.
Apply the formula to calculate the future value of the loan.
Calculate the total interest earned by subtracting the original loan amount from the future value.
Example
Let's consider a scenario with the following details:
Loan Amount: $200,000
Interest Rate: 4% per year
Loan Term: 30 years
Calculation:
Monthly interest rate: 4% / 12 = 0.3333%
Number of monthly payments: 30 × 12 = 360
Future value: $648,000.00
Total interest earned: $448,000.00
Green: Principal ($200,000) | Red: Total Interest ($448,000.00)
In this example, the borrower would have a future value of $648,000.00 after 30 years. The total interest earned would be $448,000.00, demonstrating the cost of borrowing over time.
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