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Mortgage Calculator
Mortgage calculators are used to help a current or potential real estate
owner determine how much they can afford to borrow to purchase a piece of
real estate. Mortgage calculators can also be used to compare the costs or
real interest rates between several different loans, determine the impact on
the length of the mortgage loan of making added principal payments or
bi-weekly instead of monthly payments. A mortgage calculator is an automated
tool that enables the user to quickly determine the financial implications
of changes in one or more variables in a mortgage financing arrangement. The
major variables include loan principal balance, periodic interest rate
compound interest, number of payments per year, total number of payments and
the regular payment amount.
Mortgage calculator capability can be found on most financial calculators
such as the HP-12C, in most desktop spreadsheet programs such as Microsoft
Excel and on the Web.
Uses
When 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 compund 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 using the Rebuz
Loan Payment Calculator.
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, not to exceed around
40% of your total monthly pretax income. Some mortgage lenders are known to
go as high as 55%.
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