A mortgage calculator is an essential tool when you are considering purchasing a new home. Whether this is your first home or your fifth home, a home loan calculator, as it is also referred to, can be an invaluable asset in making wise, secure business decisions about the home that is right for you and your budget.
Purchasing a home and committing to a new debt load can sometimes be a little anxiety-ridden. However, keep in mind that the mortgage calculator can take a lot of that anxiety out of the equation by giving you the peace of mind necessary to know that you are making a good decision for your future. By using a home loan calculator, you can be sure that you are buying a home that will match your family’s budget for years to come.
Listed below are 5 tips that will assist anyone in utilizing the calculator in making a wise home loan decision:
1. Use the calculator to determine the difference that various interest rates can make in your total monthly payment. In other words, make certain that when you negotiate the interest rate on your home loan you have already utilized your mortgage calculator to know the difference in the total note payment at a 5% interest rate versus a 7% interest rate for example. This gives you the ability to negotiate with the broker or lending institution with the proper information at your fingertips, and provide them with parameters that will work for you and your budget.
2. Make sure that you can afford the purchase price you plan to offer a seller on a home. How do you do that? Again, by using your calculator, and entering various purchase prices into the calculator at realistic interest rates and term lengths, you can quickly determine what price home you can afford to purchase by comparing the calculated monthly payments with what you have decided that you can afford. At this point, no matter how much you might love a higher priced home, you have to be realistic and stay within your price range.
3. Next, determine whether you can afford a 15 year mortgage or whether you should consider a longer term such as 20 or 30 years. The longer the term of the mortgage the lower the payments, but the more interest you will ultimately pay over the lifetime of the loan. Keep in mind, however, that if your financial situation changes, you can always pay “extra” toward the principal of the loan each month and reduce the number of years required to pay the loan off in full.
4. Use the mortgage calculator to determine what the “real” cost of the home will be over the lifetime of the loan. With the home loan calculator, an amortization schedule is provided. This schedule gives you complete information on how much you will pay in principal and interest each year of the loan until the time that the loan is paid in full. This information tells you exactly what the total cost of the home will be at the time that it will be paid off in full. This again, helps you to determine what areas of the loan you need to negotiate to feel comfortable with the purchasing decision you are about to make.
5. After determining a realistic purchase price, interest rate, and term for the loan, you now have a basic monthly payment. However, don’t forget, your home loan calculator does not figure real estate taxes and insurance. Consequently, it is imperative that you take the monthly payment given to you by the calculator and add a monthly amount for the real estate taxes and the insurance. The current owner or the realtor can provide you with the amount being paid by the existing owner for both of these. You can also contact insurance agents to compare prices offered for home insurance on the property.
You might also want to remember that, although the above items cover the monthly “hard” costs for the home, you will need to be certain that you have taken into consideration the fact that the home will need repairs and maintenance. Although it is impossible to predict exactly what these will cost you during your years of home ownership, you are advised to make an estimate. Many factors must be considered, such as the age of the property, how well it has been maintained, and whether you can do a great deal of the work yourself or will need to hire contractors.
In summary, the home loan calculator is a tool you should use not only when you purchase a home but also anytime you are considering refinancing your home or establishing a line of equity on your home.
You will find a number of websites that provide free mortgage calculators for you to use. You should never go property-hunting without doing your research first. Make certain you have done your homework prior to making an offer on any home by using the mortgage calculator to look at all the possible scenarios. Know exactly what you can afford to offer and do not go a penny more.
Identifing and finding the right home loan is not always a easy task. Thats why dealing through a good home loans broker, Finance Ezi
December 22, 2009
I think you are right. But you should cover more on this topic.