A Home Mortgage Calculator Can Help Answer Many Questions
If you’re considering a new home, you definitely want to sit down with your budget and a home mortgage calculator to get some very basic questions answered before you even apply for a mortgage. And if you’re considering a refinance option, a home mortgage calculator can save you a lot of time and just as many headaches. Let’s explain what we mean by this.
How Much Home Can You Afford?
Very few people have a good grasp of a how a home loan is actually amortized. They often mistakenly take the home price, add a certain amount for interest, and then divide that by 360 or 30 years of payments. Unfortunately this isn’t how a mortgage works, and using a home mortgage calculator can give you a more correct estimate of your monthly payment.
Also, many first-time home buyers forget to add in their homeowner’s insurance, property taxes, and private mortgage insurance (if required) and yet all these things are usually required as part of your monthly payment. A home mortgage calculator can’t give you exact figures but can estimate a good amount for these additional items and add them into that monthly payment amount. Again, using a home mortgage calculator will give you a more realistic idea of your monthly payment than if you tried to figure this yourself.
Using the home mortgage calculator in this way can give you a good idea of just how much home you can afford. If that dream home of yours is just out of your financial reach right now, you know you need to be a bit more modest or realistic about what type of asking price you can afford.
How Will One-Time Payments and Other Options Save Money?
Some people really don’t understand how adding even just an extra few dollars to their regular monthly payment, or adding a lump sum payment once or twice per year, can actually save them hundreds and even thousands of dollars in the long run. When you use a home mortgage calculator with the option of figuring in these types of payments, you can better understand how much interest you’re saving for the life of your loan.
For instance, if you have a $200,000 loan at 5%, your monthly payment is just over $1,073. You’ll pay over $186,500 in interest for the life of this loan. But if you add just $25 to your monthly payment, your home mortgage calculator will tell you that you wind up paying only $175,000 in interest - a savings of over $11,000!
You can run similar scenarios through your home mortgage calculator, using different loan amounts, interest rates, payment schedules, and so on. This way you can make the best financial decisions for yourself and your family, and can better understand the importance of getting the best rate possible and of paying your mortgage as quickly as possible. This way you make the home mortgage calculator one of the most useful tools you have available in your financial arsenal.
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