Ramsey Mortgage Calculator

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ramsey mortgage calculator
15-Year Fixed (Ramsey Preferred)30-Year Fixed (Not Recommended)
Ramsey Mortgage Analysis:
function calculateRamsey(){var price=parseFloat(document.getElementById('home_price').value);var down=parseFloat(document.getElementById('down_payment').value);var rate=parseFloat(document.getElementById('interest_rate').value)/100/12;var term=parseInt(document.getElementById('loan_type').value);var n=term*12;var annualTaxIns=parseFloat(document.getElementById('tax_ins').value);var income=parseFloat(document.getElementById('monthly_income').value);if(isNaN(price)||isNaN(down)||isNaN(rate)||isNaN(income)){alert('Please enter valid numerical values');return;}var principal=price-down;var monthlyPI=principal*(rate*Math.pow(1+rate,n))/(Math.pow(1+rate,n)-1);var monthlyTaxIns=annualTaxIns/12;var totalPayment=monthlyPI+monthlyTaxIns;var incomePercent=(totalPayment/income)*100;var statusBox=document.getElementById('ramsey_status');var statusText="";var bgColor="";if(incomePercent25){statusText="⚠️ TOO EXPENSIVE: Payment exceeds 25% of take-home pay.";bgColor="#fcf8e3″;statusBox.style.color="#8a6d3b";}document.getElementById('piti_result').innerHTML="Total Monthly Payment: $"+totalPayment.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2});statusBox.innerHTML=statusText;statusBox.style.backgroundColor=bgColor;document.getElementById('breakdown').innerHTML="Breakdown:
• Principal & Interest: $"+monthlyPI.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+"
• Property Tax & Insurance: $"+monthlyTaxIns.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+"
• % of Take-Home Pay: "+incomePercent.toFixed(1)+"%
• Loan Amount: $"+principal.toLocaleString();}

How to Use the Ramsey Mortgage Calculator

The ramsey mortgage calculator is designed specifically for followers of the Dave Ramsey Baby Steps. Unlike standard mortgage tools, this calculator focuses on the financial peace principles of debt-free living. It helps you determine if a home purchase fits within the "Ramsey Way"—meaning a 15-year fixed-rate mortgage where the payment is no more than 25% of your take-home pay.

To get started, enter your projected home price and your down payment. Dave Ramsey strongly recommends at least a 10% down payment, though 20% is the "gold standard" to avoid Private Mortgage Insurance (PMI).

Home Price
The total purchase price of the property you intend to buy.
Down Payment
The amount of cash you are paying upfront. Ramsey suggests at least 10-20%.
Interest Rate
The annual percentage rate (APR) provided by your lender for a fixed-rate loan.
Monthly Take-Home Pay
Your actual net income (after taxes and deductions). This is critical for the 25% rule.

The Ramsey 15-Year Mortgage Rule

When using the ramsey mortgage calculator, you will notice the default is set to 15 years. Dave Ramsey teaches that the 30-year mortgage is a "financial trap" that keeps families in debt for decades while paying double or triple the home's value in interest. The goal of the Ramsey method is to build wealth quickly, and a 15-year fixed-rate mortgage is the fastest path to total home ownership.

Monthly Payment Formula: P = L[c(1 + c)^n] / [(1 + c)^n – 1]

  • P: Monthly Principal and Interest payment
  • L: Loan Amount (Home Price – Down Payment)
  • c: Monthly Interest Rate (Annual Rate / 12 months)
  • n: Total number of months (Years * 12)

The 25% Take-Home Pay Rule Explained

The most important metric in the ramsey mortgage calculator is the percentage of your take-home pay. Dave Ramsey insists that your total house payment (Principal, Interest, Taxes, and Insurance—PITI) should be no more than 25% of your monthly net income.

If your household brings home $8,000 a month, your maximum allowed mortgage payment is $2,000. This conservative approach ensures that you have enough "margin" in your budget to finish the Baby Steps, invest for retirement, and save for your children's college education without being "house poor."

Calculation Example

Example: A family earns $100,000 gross, resulting in roughly $6,500 monthly take-home pay. They want to buy a $400,000 home with a $80,000 (20%) down payment at 6% interest on a 15-year term.

Step-by-step solution:

  1. Loan Amount = $400,000 – $80,000 = $320,000
  2. 15-Year P&I Payment (at 6%) = $2,699.33
  3. Annual Taxes/Ins Estimate = $6,000 ($500/month)
  4. Total PITI Payment = $3,199.33
  5. Check 25% Rule: $3,199.33 / $6,500 = 49.2%
  6. Result: Not Ramsey Approved. The family needs a cheaper home or a larger down payment.

Common Questions

Why does Dave Ramsey hate 30-year mortgages?

Dave argues that 30-year mortgages are designed to help you buy a house you can't actually afford. While the monthly payment is lower, the interest cost over 30 years is astronomical. A 15-year mortgage usually comes with a lower interest rate and forces you to build equity twice as fast.

Is 20% down payment required?

While 20% is ideal because it eliminates Private Mortgage Insurance (PMI), Ramsey says 10% is acceptable for first-time homebuyers. However, you must still stick to the 15-year term and the 25% income rule.

Can I include HOA fees in the 25% calculation?

Yes. According to the Ramsey philosophy, your total cost of housing (including HOA and insurance) should stay within that 25% cap to prevent your home from becoming a financial burden rather than a blessing.

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