Mortgages are commonly obtained by people for various purposes – to buy a new home, pay off existing debts to help ease financial burden etc. Many banks and financial institutions – both private and government sponsored – offer home mortgage loans that people can avail to buy a new home. Before applying for a home mortgage, one must be clear how it works, what the costs are, how much you are eligible to borrow and what will be your monthly payments.
A mortgage calculator helps an individual calculate all the above amounts. For example, after giving the necessary inputs, if your monthly home mortgage payments come to around $3500, you must calculate if your monthly income will allow you to pay this amount and yet live comfortably while taking care of other expenses. There are different unforeseen circumstances that you will need to factor in too. What if you become ill and lose your job – will you have enough savings or insurance money to cover your mortgage payments?
A mortgage calculator is usually included in the website of home loan institutions. You will be asked for information like cost of the home you wish to purchase, period of the mortgage, interest rate, salary etc. Once you input these details, the calculator will give you an estimate as to how much you will need to pay each month. You will also be offered a detailed explanation as to how the figure was arrived at. If you require any further explanation, there will be willing agents of the company who will explain all details to you.
Home mortgage rates could vary from state to state and while it is quite easy to obtain a loan, it will be more difficult to maintain the payments regularly. This is why there are so many foreclosures and abandoned houses sitting all across the country because the owners could not afford the mortgage payments and had to lose the house. Hence, lenders have become more wary and are only prepared to give mortgage loans to those with a good credit history. This is why those with bad credit will find it almost impossible to obtain a home loan.
In order to buy your dream home and yet be able to pay your home mortgage on time, you must first understand the different types of home mortgage loans on offer.
• Fixed Rate Mortgage
• Adjustable Rate Mortgage
• Interest Only Mortgages
• Balloon Mortgages
• Reverse Mortgages
Fixed Rate Mortgage means that the interest rates will remain the same for the period of the loan and you will be liable to pay a certain amount as fixed monthly payments and there won’t be any rate fluctuations.
Adjustable rate mortgage as the name suggests means the interest rates will change depending on the market. If it dips then your rates will also be low. However if it increases then your rates can also increase. So, if you are prepared to take the risk, then you can go in for this type of mortgage. The other types are lesser known mortgages. Interest only mortgage rates will be low initially and increase after the ‘Interest only’ period ends.
Balloon mortgages have low interests for a period of 5-10 years. It is easy to qualify for this and during this duration, you can pay small token amounts towards your loan. Once the protection period is over, you have to pay up the balance amount in total and how you do so is your problem. You can sell the house or refinance it or use your insurance amount to pay up the balance. Reverse mortgages are meant for senior citizens who can get a regular monthly payment based on house value, age and such. The homeowner need not make any mortgage payments while they live in the house. The outstanding balance will remain with interest being added to it. If either husband or wife die or sell the house and move out, the remaining amount must be paid up in full.
If a borrower finds that he is does not have the money to make the initial mortgage down payment, he can apply and get a private mortgage insurance. The amount is around 25% of the cost of the house and he will have to pay a premium for this money. Private mortgage insurance protects the lender from a borrower who defaults on payments. Use a mortgage calculator to get your figures right, take time to shop around and understand about the different types of mortgages and what will suit you the best before applying for one.
What is a mortgage?
A mortgage will give you a specific sum of money for a fixed tenure like 15 years or 30 years at a particular rate of interest, against the value of your house. It is an agreement between the lender and the house owner who pledges the house as security. By taking a mortgage you give the lender a document that protects his interests in your property. The county records the lien and you retain the title to the property. There can be no change of ownership until you repay the debt and get back the lien. However, if you default on the debt, the lender can sell the property to get back his loan.
Different types of mortgage
You can take a mortgage at a fixed rate of interest or an adjustable rate of interest. In a fixed rate mortgage, you pay the same sum of money towards interest throughout the tenure of the mortgage. An adjustable rate of interest you may have to pay a variable rate of interest during the tenure of the loan. This means the monthly installment may increase or decrease, so you must always have a particular liquidity in your account to pay this installment. The monthly installment also depends on the amount of down payment you make in the beginning of the mortgage. The greater the down payment, the smaller will be your monthly installments. Another important factor in a mortgage is its length. A shorter length means larger monthly installments and a longer length means smaller monthly payments. However, in a longer tenure mortgage you end up paying more money towards interest repayment and not repayment of the principle amount. Based on the above considerations and your financial obligations over the next few years, you will need to consider carefully the amount of the mortgage, its tenure and the rate of interest. Moreover, you must do some research and shop around for the best interest rates possible.
Benefits of going for a mortgage
You can re-mortgage your house to tide you over an impeding financial emergency. It can help you finance your child’s college education. It can provide funds for home improvement or any medical emergency.
As explained above you need to work out the monthly installment under different scenarios. It is a tedious process and you can use mortgage calculators available at different websites related to home finance. This will calculate the monthly installment for you quickly. Here is an example of a mortgage calculator for a fixed interest mortgage. You enter the mortgage amount; say $10,000, the annual interest rate of 6.5% for a fixed interest mortgage for 30 years. The calculator will give you the amortization schedule for every month of those 30 years. It details the repayment of interest, principle, and balance for all 12 months of those 30 years.
Similarly consider an adjustable rate 30 year mortgage, for a loan of $100000, when the house appraisal value is $125000. The calculator adds the property taxes, property insurance, state, federal taxes, and the initial interest rate. You must specify the number of months before the interest rate can change, the band within which interest can vary as per your budget, the maximum & the minimum interest rate, and the index rate change per adjustment, the margin and the index rate, as well as the months between index adjustments. Other parameters that can change include a rise in interest rates or a fall in interest rates. You can now imagine the number crunching involved in manual calculations, because of which it is advisable to use an online mortgage calculator.
Study this comparison between a short -term and a long-term mortgage for a loan amount of $100,000.The short-term loan is for 15 years and the long-term loan is for 30 years. The mortgage calculator will calculate your monthly installments including property taxes, state and federal taxes, origination fees and upfront costs. It will calculate the savings you can make and then you can decide on the tenure of the mortgage.
How not knowing your monthly payment for a mortgage can hurt you
As is clear from the above discussion, a mortgage involves several variable factors. You must decide the amount of mortgage you require based on your future commitments. If you have a steady source of income, you can go for a variable rate mortgage, as you are not short of funds. However, if you have no steady income, it is best to go for a fixed rate mortgage as you can arrange for a fixed sum by the due date of payment. Therefore, it is best to work out your monthly installment for each scenario based on your financial strength and expected future income. Since you have to make monthly payments over a long duration, it is best to provide for them in advance. If you default on your monthly installment, it can harm your credit rating and hamper chances of future credit. Think hard about all the parameters discussed above and only then go for a mortgage if you can service it over 15 to 30 years as the case may be.
Mortgage is an option for people purchasing new homes, or for people who wish to raise cash against their existing property. Mortgage is popular in California as there are many options, available for borrowers according to their requirements. Due to such a large market, mortgage offered to borrowers also vary from company to company. The mortgage rates for them are influenced primarily by credit rating of the borrowers, and value of the property among other factors. Mortgage calculators help the customers to find out the amount of mortgage, rate offered, and monthly installments, by simply punching in the required information. They can even be used to compare between two options, such as a fifteen-year term or a twenty-year term.
These calculators also allow the borrowers to assess, if they need to consolidate their debts, and whether they can then opt for a mortgage. The consolidation of debts means combining all existing debts as one loan. This may help the borrower gain a more favorable interest rate. Borrowers need to enter the number of months they need for repayment. The calculator then displays the monthly payment, savings in interest expense, and any tax-related savings, and total cost savings.
The mortgage loan rate calculators also guide the borrowers, to decide from among the most suitable financing options, such as mortgage or refinance. However, there are quite a few factors that affect the mortgage rate calculations. These calculators are aimed at providing the customers with an idea regarding their mortgage.
For homebuyers another way to compare mortgage rates is to approach a local broker, or directly obtain a quote from the lender. However, for customers who would like to do their own research of the market, these calculators help by doing the number crunching. While purchasing a mortgage, customers have to consider a lot of factors to decide on the right combination. It might be overwhelming for many customers, to initially choose the right mortgage, then between fixed rate and adjustable rate, and also if they really need a mortgage. Mortgage calculators in California take the laws and specifications of the state government into consideration before giving out an estimate.
Mortgage calculators are programmed with the ad hoc purpose of calculating monthly payments to be done on a mortgage. Such calculators are called mortgage payment calculators. These calculators can also do amortization schedules.
Mortgage payment calculators are different from simple mortgage calculators. They not only compute the interest payable per month, they also split the principal according to the tenure of the mortgage. The payment is usually a sum of the portion of the principal to be paid in that month, along with the interest payable.
Several mortgage payment calculators are freely available online. They need the amount of mortgage taken, current rate of interest and the tenure of the mortgage as inputs. There is a ‘calculate’ tab which, when clicked, will calculate and display the monthly payments. A further click on an ‘amortize’ tab would display a detailed chart showing the entire schedule of payments. Some mortgage payment calculators have separate tabs asking for annual taxes payable to the state on their property plus insurance, if any. Such calculators need the zip code. These are added to the monthly payment. If a down payment is done, then that amount is deducted from the calculation. Some mortgage companies require fixed monthly down payments. Mortgage payment calculators deduct all such down payments and display a final figure.
Mortgage payment calculators are an essential feature of mortgage-selling websites. They are very simply programmed so that even a layman can use them. In fact, people nowadays use these free online mortgage calculators even before approaching financial institutions for a mortgage. This gives them a picture of how much they can afford and how much they will have to pay per month. Some websites provide three mortgage calculators alongside each other, so that users can fill in three different scenarios and check out what is best suited to them.
People shopping for a home or in the market for a house always ask themselves; how much can I borrow affordability. It is always the question of how much you can borrow and the affordability of taking out a mortgage. There are many mortgage calculators, income multipliers and affordability calculators that you can access online. Online mortgage calculators can provide the much needed estimations required for your home loan search.
Sometimes your search can take you to too many different websites in order to complete several estimations and calculations you need. But some lending agencies and financial institutions can provide a whole array of tools for you to utilize. This way you may not have to jump from website to website. But there is a drawback to this. And that is you may not be able to search several lending agencies which may offer lower rates.
The main reason you will be looking for answers to your queries on affordability of a house property or how much can I borrow affordability, is to get the lowest and best rate possible. And if you do not search different online sites you miss out on some of the little known mortgage companies that may offer you a better deal.
Using a home loan affordability calculator can tremendously help you in your home loan search. It can calculate and then you can compare how much you can borrow with the estimated interest rate and loan term. Affordability is an essential factor to be considered when you are in the market for a house property. You have to have a complete analysis of the rates, affordability and how much you can borrow.
An online home loan or mortgage calculator can provide you an estimate of the maximum amount that you can borrow in relation to your expenses and income. You can always try different numbers of years and the amount of expenditure and income into the calculations. These will give a better look at different scenarios that may be applicable to you. Knowing what you can afford can provide you the sense of ease going with your home search.
The advancement of the internet has brought speed and ease in almost anything we want to do now. In cannot be further from the truth when you can easily get a mortgage quotes online. Home mortgage calculators give you the quotes and mortgage interest rates you are looking for.
And by using these home mortgage calculators, you can have the answer to your question of; mortgage how much can I borrow affordability. Thus with online mortgage calculator and mortgage rates predictions, you can have the sense of ease and comfort in knowing what lies ahead with your home loan search.
An adjustable rate mortgage is typically a loan that is:
- fixed for a certain time frame
- adjustable after the fixed period is over for the remainder of the loan
A loan may be fixed for several months or several years.
The interest rate on a mortgage will typically adjust based on a predefined interest rate index.
Many mortgages have a lifetime total cap on their interest rate. This is the maximum interest rate over the life of the loan. Mortgages may also have have periodic caps, such as a maximum rise in the interest rate over a given period of time. This type of feature is to keep the interest rate from changing too fast.
Measuring Your Risk
You can figure out your maximum interest rate risk by using an online mortgage calculator.
The mortgage calculator will help you figure out what your maximum possible payment could be.
You will need to factor in your loan amount, interest rate, and loan term.
A Risk Example
A $460,000 mortgage:
- 7.5% interest rate
- 30 year loan term
- monthly payment $3,216
The same mortgage if the rates rose to the interest rate cap of 11%:
- 11% interest rate
- 30 year loan term
- monthly payment of $4,381
You can see this is your maximum possible increase in your payment.
There are many free mortgage calculators available online to help you figure this out.
We’ve got all the help you need to get the best mortgage deal for you. Visit Our Main Mortgage Website.
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