Still, the temptation to throw caution to the wind can seem very exhilarating.
Preparation is the key.
No matter why the person — whether an investor or potential homeowner — throws their name into the hat for that bargain property, it is essential that they understand the financial fundamentals involved. A mortgage calculator is thus an important tool in determining whether the property is one they can truly afford.
For anyone seriously considering buying a property and making the commitment to years of monthly mortgage payments on a home, use of financial calculators is key to determining the overall affordability of the property and the likelihood that the buyer or investor can stay on top of the mortgage payments.
Free online financial calculators are available on real estate sites such as RealtyTrac. While visiting the site (www.realtytrac.com) a buyer or investor has the opportunity to try out a variety of free financial calculators available online. Doing so will give them a good idea as to whether buying that particular property is even financially feasible for them.
There are multiple types of calculators available. Knowing what those types are, and how to utilize them, will leave a buyer or investor in the best possible position to be fully informed about finances before they go in to sign loan documents.
- Affordability Calculator — After income, monthly expenses, debts and any other monthly financial information are all entered, a much clearer picture forms as to how much of a home is truly affordable based on type of loan, interest rate and the length of the loan.
- Biweekly Calculator — For those who choose to make their mortgage payments on a biweekly basis instead of monthly, this calculator shows what the difference in interest will be over the life of the loan. Paying biweekly will save thousands of dollars a year since the borrower ends up making 13 payments instead of 12.
- Down Payment Calculator — Through the use of a down payment calculator a potential borrower can determine how much the monthly mortgage payment will be depending on the amount of down payment, the interest rate and the term of the loan. The amount of down payment determines also determines whether or not private mortgage insurance (PMI) will be required. With anything less than 20 percent down, the mortgage lender will require PMI to protect themselves against the borrower defaulting on the loan.
- Fixed Rate vs. Adjustable Rate Loans — Having a fixed rate on a loan means that the payments on the loan will remain steady over its term. Adjustable rates, on the other hand, usually begin at a rate that is lower than the average fixed rate and then adjusts to the market rate after a pre-determined initial time period.
- Loan Calculator — Depending on the interest rate, loan amount and loan term the amount of monthly mortgage payments made each month can vary widely. Changing each variable in the calculation will result in a varied loan amount the borrower can afford and the interest rate the borrower should be paying in order to keep the monthly payments within budget.
- Mortgage Points Calculator — Each point is equal to 1 percent of the total amount of the loan. On the one hand, paying the points upfront lowers the interest rate over the life of the loan which means the borrower pays less in the long run. On the other hand, points paid up front can be used toward the down payment instead. This calculator will assist the borrower in determining the effect each point will have.
- Refinance Calculator — Whenever there is a drop in interest rates, many people attempt to refinance their current loan because it normally means future payments at a lower interest rate than what they had previously been paying. Refinancing can save money now, but it also means lengthening the amount of time the borrower will be paying off the loan. The refinance calculator can help determine just how much money might be saved depending on the interest rate and term of the loan.
- Rent vs. Buy Calculator — By comparing the costs of owning a home to renting a house, this calculator can help determine which option fits the borrower’s budget and future goals. Despite the extra costs usually associated with homeownership, the tax and home appreciation benefits alone can bring everything into a more positive light.
With all the calculator options currently available, it would be close to impossible for anyone to go into the lending process uneducated and under prepared. Today’s online tools make it easier than ever for buyers and investors to make the best decision possible to meet their financial goals.
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