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Mortgage Calculator

Posted by  on Apr 16, 2009
 

If you are thinking about taking out a mortgage, there are a few things to consider. You will have to take out monthly payments, and in order to do so, you should be familiar with how to use a mortgage calculator.

This will help you find out how to best use your finances. Make sure that you understand how much your monthly payments will be and what they cover. Your mortgage company should be able to give you this information in advance.

Keep in mind that with some loans, you will be required to make monthly payments on the principal and interest. With other loans, you may be required to pay interest only on the borrowed amount.

With these loans, your monthly payments will not reduce the principal amount of the loan. With such a loan, you will be required to pay back the entire borrowed amount at the end of the loan period. These loans are popularly known as balloon loans. If your loan has a balloon payment, you should consider how you will arrange to repay the entire amount when it becomes due.

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.

Also, 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. Some 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.

Additionally, 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. 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.

On home equity lines the mortgage company does not have to give you the exact amount of the monthly payment, but must explain how it is figured. This is because the borrowed amount will vary and your outstanding balance will change if you use the line of credit. 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 compound interest mathematics for proper use.

In contrast, mortgage calculators make answers to questions regarding the impact of changes in mortgage variables available to everyone.

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