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 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%.
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