Dave Ramsey Mortgage Calculator: My Honest Review

There are a multitude of free online mortgage tools to assist you in calculating an estimate of what your monthly mortgage payment will be — but how do you know which resources are reliable?

It’s no secret that the mortgage application process can be overwhelming, which is why it is crucial to fully understand what you can afford and which products and programs are right for you.

Let’s chat about Dave Ramsey.

Dave Ramsey is a prominent figure in the personal finance industry. He is well known for creating the 7 Baby Steps to eliminate debt and achieve financial freedom. He frequently shares his opinion on a wide array of finance-related decisions and has created a number of online resources to help people manage their money. In this post, we’re covering the good, the bad and the ugly — here is everything you need to know about Dave Ramsey’s mortgage calculator.

Also, as a Dave Ramsey die hard fan, I created the 3 best, simple things that you can do today (in my opinion) that can help you get to baby step millionaire just that much faster. I’d encourage you to check it out!

Are Mortgage Calculators Reliable? 

A mortgage calculator can be a great resource to gain an understanding of how much you can afford to borrow on any home purchase. In just a few minutes, you can predict what your monthly mortgage payment will be and get a ballpark idea of how much you will pay in interest over the life of the mortgage. Additionally, you can compare and contrast what your monthly payment will be with the same loan amount for a fixed versus an adjustable mortgage rate.

Remember that the more information you provide the calculator, the more accurate estimates you will receive back. For this reason, it is vital to use a calculator that includes elements like property tax and insurance. Missing information that leads to an inaccurate estimate for your monthly payment could leave you with some major hurdles to cross down the road. 

Similarly, we know that an online tool like a mortgage calculator is not an industry expert. You most certainly can gain preliminary insight as to what you can afford, but an online calculator cannot forewarn about certain intangibles; for example, that the loan you qualify for may require private mortgage insurance (PMI) and will thus increase your monthly payment. These tools cannot factor in things such as the home’s location, a buyer’s employment status or closing costs and fees. For this reason, it is important to take the information you receive from a mortgage calculator and share it with a licensed professional such as a real estate agent or mortgage broker. These experts can further explain the precise details of which products and programs fit your unique needs. Subsequently, a mortgage specialist can walk you through the next steps on your journey to homeownership such as getting pre-approved and qualifying for a mortgage. 

Do you qualify for a mortgage?

Many people do not qualify for a mortgage due to challenges with their credit score or credit report. There are free tools available that can help you estimate whether you qualify for a mortgage such as Ascend’s debt options calculator.

Understand the Variables of Dave Ramsey’s Mortgage Calculator

So how can you interpret what the Dave Ramsey’s mortgage calculator is telling you? A good place to start is to understand the different variables that are going into the calculation. 

  • Home Value: The first step to this calculator is to enter the home price. This can be an estimate based on your budget, or it can be the exact cost of a home you are interested in purchasing. 
  • Down Payment: A down payment is, of course, the initial cash payment made when purchasing a home. This calculator provides you with both the recommended down payment as a monetary figure and as a percentage of the total purchase price.
  • Type of Mortgage: This calculator allows you to choose from the three mortgage types — 15-Year Fixed-Rate Mortgage, 30-Year Fixed-Rate Mortgage or 5/1 Adjustable-Rate Mortgage (ARM). Ramsey includes detailed definitions of each mortgage type right below the calculator to quickly refer to when adjusting the information that you enter in. 
  • Interest Rate: The interest rate is used by the calculator to give an estimate of the total amount of interest fees you will pay over the life of the loan. Note: this can also be shown as a percentage, as shown by the calculator.
  • Homeowner’s Insurance: Homeowner’s insurance is typically a non-negotiable requirement but can vary by state, home value and other related external factors. 
  • Property Tax: Property tax is based on government appraisal; however, they vary by municipality, by state and sometimes by home value. 

How The Mortgage Calculations Work

Upon entering all of this information, the calculator provides you with a monthly payment breakdown that includes principal, interest, property taxes and homeowner’s insurance. Moreover, it even provides you with a full payment schedule that details your balance for the entire life of the mortgage. This detailed schedule is broken down year by year to show the amount of interest and principal to be paid, as well as what the remaining balance will be upon completion of that year.

The calculated result can be adjusted with just one click to show you how your payments would change. Variants consist of either including or excluding PMI, property tax or homeowner’s insurance. Ramsey’s calculator also gives you the option to include a homeowner’s association fee (HOA) into your decision-making process. By maneuvering these options, the calculator will provide you with each of the different home mortgage repayment scenarios you could find yourself in.

Once you have made alterations to each of the different options and settled on your detailed information, Ramsey’s mortgage calculator includes a simple recommendation for your personal situation. For example, “Due to having the lowest total cost, we recommend a 15-year fixed rate mortgage with at least 10% down payment (ideally, 20% to avoid PMI).” This simplistic, clear-cut recommendation can be helpful to potential borrowers before they take the next steps to applying for a mortgage.

Pros of Dave Ramsey’s Mortgage Calculator

You don’t need to be a finance wiz to understand Dave Ramsey’s mortgage calculator, which is just one of the advantages of this tool. Other pros of this online calculator include: 

  • User Friendly: This mortgage calculator is well-designed to make it easy for anyone to get straightforward calculations and a clear recommendation. 
  • Monthly payment breakdown: A pie chart depicts a clear visual of the costs that your monthly payment will be made up of. 
  • Full payment breakdown: The full payment schedule permits you to see the bigger picture as to what you will be paying in the long run. 
  • Flexible: The design allows you to manipulate each important aspect of selecting the right mortgage.
  • Down payment: This feature can help you consider what to offer on a home, as well as give insight as to whether the seller is over-asking. You can also see how a higher down payment will lower your monthly payments. By changing the value of the home in the calculator, the recommended down payment will change too. 
  • Tool to find a local real estate agent: An added bonus of Dave Ramsey’s mortgage calculator is its free option to find a local real estate agent through one of their endorsed partners.

The Cons of Dave Ramsey’s Mortgage Calculator

As with any mortgage calculator, there are some notable limitations to consider. Dave Ramsey’s mortgage calculator does not take into account the following: 

  • Monthly income: Your monthly income will impact the amount that you can afford on a mortgage. 
  • Closing costs: Closing costs may include fees from the appraisal and are unavoidable.
  • Additional fees: There are many additional fees to consider in the homebuying decision process, such as lender fees and origination fees.
  • Additional Insurances: If you are buying a property along the coastline, you may need flood insurance or hurricane insurance. Unless you know the specific home that you are pursuing, it can be hard to know if you should include this in the homeowner’s insurance option of the calculator.
  • Impact of accelerated payments: An online calculator cannot take into consideration if you plan to make additional principal payments each month in an effort to reduce your interest payments over the life of the loan.

Alternatives to Mortgage Calculators

Using a mortgage calculator puts you in a good spot to feel confident about what you can afford and what mortgage might be right for you. However, there are other alternatives to pursue that may give you information tailored your needs. 

  • Amortization Schedule Calculator: An amortization schedule calculator can give you both your monthly payment and an amortization schedule, which shows how much money will be paid in principal and interest over time. Bankrate offers one that also includes helpful information about how the calculation is derived. 
  • Mortgage Refinance Calculator: If you are interested in refinancing your current mortgage, this tool may suit you best. Nerdwallet’s refinance calculator can tell you the cost to refinance, as well as how much this decision will reduce your monthly mortgage payment. 
  • Rent vs. Buy Tool: Unsure if renting or buying is the best decision for you? Smartasset offers an online tool to determine which route to take based on factors such as location, marital status, income and how long you intend to remain in a particular home. 
  • Consult an expert: The most valuable alternative to a mortgage calculator is undoubtedly to consult a licensed professional such as a mortgage broker. A good broker will get to know you and your financial health to further work with lenders and get you a competitive rate with lower closing costs.

In sum, Dave Ramsey has used his extensive experience and knowledge to build a top-notch online mortgage calculator that will help individuals to get a clear estimate of their potential mortgage payment. Our expert opinion is that potential borrowers who use this tool will gain a strong sense of what their future mortgage plan will look like.

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