Are you thinking of buying a home but have no idea what you can afford? Mortgage calculators take the guesswork out of finding out what your payments will be based on any amount borrowed. Going online makes doing the calculations a simple and convenient way to find out this valuable information.
How a Mortgage Calculator Works
A mortgage payment calculator will tell you how much your payments will be based on several factors:
- Amount you want to Borrow
- Interest Rate
- Mortgage Term
- Payment Schedule
Using the Mortgage Calculator
Once you have found a website with an online mortgage calculator, using the mortgage calculator is usually a matter of simply filling in the blanks or using a pull-down menu. Major banks will have a mortgage calculator on their websites, and there are also other sites that have calculators available online.
You’ll be asked for the amount you are interested in borrowing. (This doesn’t include the down payment you will be putting down on your new home.) Next, plug in the rate type (fixed or variable) – you can always run both types to find out what difference it makes to the payments – and the interest rate.
The interest term is another variable you will need to punch in when you want to calculate how much home you can afford. This could be six months, 1, 2, 3, 4, or 5 years.
Next, you’ll want to choose your payment frequency. Most lenders will give you a choice of how often you make your mortgage payments, and it’s often more convenient to tie your payments to a pay period. If you or your spouse or partner gets paid biweekly or semi-monthly, you can arrange to have the mortgage payments to coincide with those dates. Making mortgage payment more often saves you more money in interest over the term of the mortgage and pays off the principal sooner, as opposed to making monthly payments.
Lastly, you’ll input the amortization period you want to use. Twenty-five years is standard, but you can use a shorter time if you want.
Based on this information, you can get an idea of how much your mortgage payment might be if you borrowed a certain amount. Keep in mind, it doesn’t include other expenses that go with owning a home, such as increased costs for utilities, taxes, buying furniture and appliances, etc.
When you are ready to start looking for the best rates on a mortgage, contact Mark Price, mortgage broker. He has numerous contacts among lenders and will help match you a provider who will give you the best rate for your personal situation.