When looking to purchase a house for the first time, or move into a new house, one of the best tools available is a mortgage calculator. Mortgage calculators are typically used to help with budgeting and comparing the overall costs of different houses with varying prices, tax rates, and association fees. Many financial websites have mortgage calculators available for free, all working in the same basic fashion. Simple mortgage calculators will only take several factors into consideration, but the more robust ones will allow for a great deal of customization.
How Mortgage Calculators Work
The mortgage calculator has fields for the home price, down payment, interest rate, loan term, property taxes, home insurance, private mortgage insurance, and any homeowner’s association fees. After everything is properly entered the fields, the calculator takes everything into account and provides a monthly payment based on all the factors. More robust calculators will further break this monthly payment down, showing exactly what portion of each monthly payment is going towards taxes, insurance, principal and interest. They will also include a payment schedule, showing how much principal remains at each stage of the payment schedule.
Benefits of Using Mortgage Calculators
A mortgage calculator is a powerful tool because it gives a consumer everything they need to know about purchasing a home very quickly. Comparing homes in different municipalities can be difficult because home prices, property tax rates and any association fees can differ between them. A mortgage calculator allows us to compare a slightly more expensive home with lower taxes to a less expensive home with greater taxes. Another great feature of a mortgage calculator is it allows us to tinker around to figure out the solution that works best. It will give the exact impact on our mortgage, for example, if we put an additional $5,000 down instead of keeping it for a rainy day. Another example would be giving us the ability to see the effect a change in interest rates would have on our monthly payment. This could help us figure out if refinancing is worth the hassle, or if it would be worth waiting a year to purchase a house to continue to improve a credit score.
Mortgage calculators are essential tools to a prospective homeowner, or a current homeowner looking to lower their mortgage payment but putting additional money towards the principal or just trying to refinance for a lower interest rate. It is important to note, however, that mortgage calculators are not final, and any information found on a mortgage calculator should be discussed with a financial professional before action is taken. Mortgage calculators are a powerful tool, but they are not binding and less effective calculators online can be less accurate. Overall, though, they are a great tool and well worth utilizing for any type of potential home owner.