Many people are confused by the economics and math of mortgage calculations, and a mortgage calculator is a useful tool for anyone who wants to be well prepared with their own figures before negotiating a mortgage.
It is much better to check out mortgage calculations in the comfort and privacy of your own home than in a mortgage lender’s office. You have time to reflect on the information and try out a few variations in interest rates and repayment terms. You can also get a good idea of the mortgage you are likely to secure, and set your sights on homes that come within your price range.
Sometimes renting is better than buying until you have saved enough for the house you really want, especially if you are young and not yet earning a lot. There is a mortgage calculator that lets you decide which is best.
Rent or Own: With this calculator you fill in boxes with your rental and house purchase details and the calculator provides you with the respective benefits of rental or purchase. This is given as a cash figure.
Let’s assume you have decided to buy. You now want know how much you will be allowed to borrow.
Prequalification: This mortgage calculator allows to you to determine the maximum your income will allow you to borrow based on your income, outstanding loans, and interest and repayment period. This is the maximum amount that a mortgage lender will be prepared to lend you. However, mortgage calculations do not take any of your expenditure into account other than loans, so you may not be able to afford the maximum allowable.
Affordable Mortgage: With this type of calculator, you enter your affordable monthly repayment, the current interest rate and the term of the mortgage. The result is the total mortgage loan that you can afford. This should be no more than that allowed. You can use these two mortgage calculators to come up with an affordable mortgage figure that provides you with a price range when house hunting.
Mortgage repayment calculator: Now that you have an idea of the amount of your projected mortgage, the interest rate and the term, this calculator will provide you with a final monthly repayment amount, broken down into how much of that is interest payment, and how much is repayment of the principal. Some mortgage calculators provide monthly breakdowns, and others annual.
Additional payment calculator: As your income increases you will likely want to start increasing your monthly mortgage repayments so that you pay it off faster and increase your equity. This calculator tells you how much you will save by making additional payments. It can also tell you how much extra you have to pay monthly in order to reduce your term by a stated number of years.
First time buyers often take their first mortgage out over the maximum time period allowed in order to keep their repayments low, or to make best use of their affordable repayments in purchasing the best property the can. As their income increases, through promotion or inflation, they can use this type of mortgage calculator to figure the effects of different extra repayments.
If all you want is to find out what a mortgage will cost at certain interest rates or over specific repayment terms, the simple mortgage calculator will private mortgage insurance suffice. All this does is to calculate the monthly repayment from the three variables. You can play around with interest rates and repayment terms on specific mortgage amounts.
This is more useful that you might think. You should never take the maximum mortgage you have calculated that you can afford since increases in interest rates can make significant differences to your monthly repayments. If you are already stretched, and the interest rate rises, you could find yourself in serous trouble.
Use this calculator to find out exactly what effect each percentage increase in interest has on your monthly repayment, then plan for a certain increase sometime in the future. Check out what that means in terms of repayments, then arrange your mortgage to take this into account. Thousands of people fail to do this and have their homes repossessed every year.