Mortgage calculators are used to help a current or potential real estate owner determine how much they can afford to borrow to purchase a piece of real estate. Mortgage calculators can also be used to compare the costs or real interest rates between several different loans, determine the impact on the length of the mortgage loan of making added principal payments or bi-weekly instead of monthly payments. A mortgage calculator is an automated tool that enables the user to quickly determine the financial implications of changes in one or more variables in a mortgage financing arrangement. The major variables include loan principal balance, periodic interest rate compound interest, number of payments per year, total number of payments and the regular payment amount.
Mortgage calculator capability can be found on most financial calculators such as the HP-12C, in most desktop spreadsheet programs such as Microsoft Excel and on the Web.
Uses
When purchasing a new home most buyers choose to finance a portion of the purchase price via the use of mortgage. Prior to the wide availability of mortgage calculators, those wishing to understand the financial implications of changes to the five main variables in a mortgage transaction were forced to use compound interest rate tables. These tables generally required a working understanding of compund interest mathematics for proper use. In contrast, mortgage calculators make answers to questions regarding the impact of changes in mortgage variables available to everyone.
Mortgage calculators can be used to answer such questions as:
If I borrow $250,000 at a 7% annual interest rate and pay the loan back over thirty years, with $3,000 annual property tax payment, $1,500 annual property insurance cost and .5% annual private mortgage insurance payment, what will my monthly payment be? The answer is $2,142,42 using the Rebuz Loan Payment Calculator.
You can use an online mortgage calculator to see how much property you can afford. A lender will compare your total monthly income and your total monthly debt load. A mortgage calculator can help you add up all your income sources and compare this to all your monthly debt payments. It can also factor in a potential mortgage payment and other associated housing costs (property taxes, homeownership dues, etc.). You can test different loan sizes and interest rates. Generally speaking lenders do not like to see all of your debt payments, including your property expense, not to exceed around 40% of your total monthly pretax income. Some mortgage lenders are known to go as high as 55%.
External links
- Mortgage Calculator Calculate the monthly payments and generate an Amortization schedule table for the loan.
- Advanced Mortgage Calculator A mortgage calculator with a difference: compare the relative costs of buying versus renting taking into account a number of different factors.
- Karl's Mortgage Calculator A graphical calculator that uses Java to display the visual effects of changing mortgage payments - useful for "What if?" scenarios.
- Online Mortgage CalculatorsHere's a list of mortgage calculators to help begin the loan process, figure out your monthly payments, minimum payment options, debt consolidations, real estate selling, and other calculators.
Categories: Economics and finance stubs | Accounting software | Basic financial concepts | Real estate
