Every lender offers different terms to their borrowers. The amount each person ends up paying depends on the term limit set and the agreed upon interest rate. Borrowers should contemplate all term options before choosing which lender meets their needs. Mortgage calculators help accomplish this goal.
What are Mortgage Calculators
Potential home buyers should not begin using a mortgage calculator without first understanding what it is. People require awareness of the device before they can truly understand how to use it to their advantage. Mortgage calculators works as a tool that helps borrowers determine what amount they might pay each month for a mortgage. The calculator takes the total mortgage amount combined with the interest rate and term years for repayment. These numbers combined provide a monthly payment amount for the borrower.
Borrowers should avoid entering information only once. Multiple comparisons provide better data on what payments to expect. The term years for repayment can get switched to a lower or higher amount to see what payments look like. Interest rates can also vary, causing the payment amount to change. Many comparisons are necessary to receive accurate data and find the best deal.
Where to Find Mortgage Calculators
Mortgage calculators are easy to access. Most lenders have a calculator directly on their site. It is best for borrowers to try each potential lender's calculator to determine an estimate for payments. The lender with the most reasonable repayment terms and interest rate is often the best choice.
Additional calculators are available online. Borrowers can do a simple search for mortgage calculators and come up with a long list of options. Potential buyers should test a variety of the tools to see if similar results are found from each.
Not all mortgage calculators work as well as they should. Some offer added features that make the payment amount more specific and reliable. While one calculator may show monthly data, another may even offer a filter to show information on a year to year basis. These differences help increase the calculator's usefulness.
Additional Payment Calculator
The average mortgage calculator computes monthly payments over a fixed period. 30 and 15 years are the most common. Potential home buyers considering making extra payments should use an additional payment calculator instead. The basic information gets entered as usual. The additional payment amount also gets entered. Borrowers can even list how many times they expect to pay this extra amount per year. They may choose to pay it once, twice, or even every single month.
Once the user decides which selection is best and gets it entered, the calculator works to determine accurate monthly payment amounts. The pay-off time decreases with these additional payments added. The calculator will actually show each person the amount of time saved thanks to these extra payments, as well as the lower interest amount they will pay.
Advanced Mortgage Calculator
Advanced calculators allow borrowers to enter further details about their mortgage. It helps to find the most accurate results. Some calculators provide space to state the type of condition the borrower's credit score is in. Higher scores result in lower rates while lower scores produce higher ones. The rates and monthly payment amounts may also change if they get applied to a refinance loan instead of a first-time mortgage.
Start dates are also available on advanced calculators. Users can select the date they plan to start the mortgage and even include the percentage for property tax. PMI percentages may also be added. This is the private mortgage insurance necessary to pay when a down payment falls below 20% of the total mortgage price.
Bi-Weekly Payment Calculator
Not everyone wants to think about terms monthly. Some would rather make bi-weekly payments so they can avoid paying such a large lump sum at once. Bi-weekly payment calculators still require details regarding the term years and annual interest rate. It calculates amounts for every 2 weeks, rather than once a month. This makes payments smaller and will save people money in the long run.
Lenders sometimes allow their borrowers to make interest-only payments. These rates are less than full amortized payments. Home buyers with high credit scores and an established history are typically the most credible candidates. The interest-only calculator combines the annual interest rate with the term years and total mortgage amount to come up with the final payment.
Down Payment and Closing Costs
Several mortgage calculators allow users to enter details regarding the down payment and closing costs. This helps pinpoint a more accurate result. Most people look at payment calculators for the basic mortgage amount and interest rate. Many fail to remember the down payment that gets deducted from the total amount. This lowers payments slightly. Added closing costs may make payments higher if this amount gets included in the mortgage total.
Calculating Tax Benefits
The monthly payment amount is not the only calculation a mortgage calculator can make. Tax benefits of owning the home can also be found. Tax benefit calculators take the total mortgage amount combined with the interest rate and term repayment to find how much tax deduction savings will show each year. The first year will see a major tax deduction. As the term years decrease, so does the amount saved. This calculation helps people see that a higher interest rate or mortgage total may prove beneficial. The more money paid, the more money saved on taxes.
Calculators are valuable tools to use. Customers need to realize though that each mortgage calculator only offers estimates. The true amount may vary slightly depending on which lender the customer chooses and what final agreement the two make regarding rates and terms. There are still other factors to consider when contemplating a mortgage.
Experts recommend contemplating terms carefully. Using various mortgage calculators will help people find the most reasonable terms and repayment schedules for them. It will also help each borrower choose a valuable lender that meets their needs.