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.
Mortgage calculators can be used to answer such questions as:
If I borrow $250,000 at a 7% annual interest rate and pay the loan back over
thirty years, with $3,000 annual property tax payment, $1,500 annual
property insurance cost and 5% annual private mortgage insurance payment,
what will my monthly payment be? The answer is $2,142.42.
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
(property taxes, homeownership dues, etc.). 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) exceed around 40% of
your total monthly pretax income. Some mortgage lenders are known to allow
as high as 55%.
The fixed monthly payment for a fixed rate mortgage is the amount paid by
the borrower every month that ensures that the loan is paid off in full
with interest at the end of its term. The monthly payment formula is based
on the annuity formula.
As a recent
trend since 2007, in a wake of a
crisis that was founded on many individuals' bad mortgage decision in
residential borrowing, a new generation of mortgage calculation tools has
emerged. They are better equipped to estimate the long term cost and
financial risk of various
types of mortgages. Rather than mortgage calculator, the new type of
tools has become popularly known as 'mortgage analyzer'. Their main
advantage is in the analysis of adjustable rate mortgages where the
potential cost and amount owing of the mortgage are estimated under
thousands, sometimes millions of possible future mortgage rate scenarios,
and then aggregate figures for average cost and risk based on all
scenarios is estimated. Conventional mortgage calculators are capable of
handling just a handful of scenarios.
You can download the free
Home Loan Calculator here.