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Advantages of using a home mortgage calculator

Posted by  on May 03, 2010
 
Many mortgage lenders, realtors and potential home buyers use what is known as a mortgage calculator. As the name suggests, it’s an easy and quick way to get an idea of how much your monthly payments will be, based upon the amount of down payment, price of the house and the interest rate. A mortgage calculator puts you in control and makes the home buying process a little less intimidating.

In the early days of the Internet, on-line mortgage calculators became popular — giving potential home buyers the information they needed, without having to pay for it and in a format they could easily understand. Since then, mortgage calculators have become more sophisticated — today, not only do they compare rates and products from the same lender, but make it easy to compare different lenders.

Mortgage calculators are generally easy to use — even for a first time buyer or for those of us who don’t have a head for figures. Most of us, when purchasing a home are concerned with just the bottom line — how much money we have to provide as a down payment, how much our monthly mortgage payment will be and what the length of the mortgage is. In short — whether we can afford it or not.

Anyone who has entered information into an on-line form can easily use a mortgage calculator. The simplest mortgage calculator usually asks you for just three things - the amount of the purchase, the length of the mortgage and the interest rate. Some may also indicate how much you can afford based on your annual income.

If you are comparing different interest rates, you can instantly see how the rate affects the amount of your monthly payments. Just a slight difference in the interest rate can mean a significant difference in how much you are paying every month — especially on a more expensive home. This fluctuation is particularly important if you are taking out an adjustable rate mortgage, rather than one with a fixed rate.

Should you put more money down — or perhaps keep that extra money for an expensive vacation, home improvements or a college fund? If you are considering how much money to come up with as a down payment, you can easily see how this amount can significantly affect the amount of your monthly payments. And if you are thinking of refinancing your current mortgage — using a mortgage calculator can help you compare options.

Using a mortgage calculator is fast as well. You can obtain a figure within seconds, or compare different lenders’ products within minutes, rather than spending hours poring over figures. Using a mortgage calculator also allows you to have a fairly accurate idea of what you can or cannot afford before you sit down and talk to a lender or realtor. You can print the results out and have them with you when you discuss mortgages or start looking at houses.

Some mortgage calculators are even more sophisticated — not only will they give you an idea of your potential monthly payment; they will also give you advice on whether to buy, sell or foreclose. And if you aren’t sure whether now is a good time to buy a house - some calculators will also offer advice as to whether it is better for you to buy or rent your home.

Some mortgage calculators can be used in conjunction with a household budget calculator as well - offering a total overview of your financial situation in a matter of a few seconds. Keep in mind that you should only use these results as a guideline — but they do give you a sort of overall financial picture without having to spend time and money on achieving the same result.

On the typical mortgage, most of your monthly payment actually goes towards paying the interest — that amount decreases every month over the term of the mortgage. Some mortgage calculators will give you a breakdown of each month’s payment so you can easily and instantly see how much of your payment is interest and how much is going towards the principle.

Likewise, if you are in the position of being able to pay extra on your mortgage every month, a calculator will easily demonstrate the financial advantages of doing that. If you want to pay off your mortgage off in 20 years, rather than 30 — a mortgage calculator will show you how much extra money you will need every month to make that dream become a reality.

Buying a home is stressful and complicated enough. Using a mortgage calculator takes away some of the stress, allowing you to quickly and easily compare products and decide what you can afford.

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