Many first time homebuyers go into the mortgage process without completing what is arguably the most important step: Using a good online mortgage calculator prior to meeting with a bank or a loan officer.
It's not too difficult to see how mortgage brokers and loan originators can steer homebuyers into accepting deals that are more beneficial to the broker than YOU, the buyer � AND IT�S NO WONDER!
Unsuspecting homebuyers lacking any grasp of how these loans actually work many times are easily confused and even overwhelmed with the process and terms. Points, principle, interest rates, interest only loans, ARM, FRM etc... can ALL be confusing.
Why not teach yourself the basics of home loans by using a good online mortgage calculator prior to actually sitting down and talking with a broker or bank?
Online mortgage calculators are standard on most bank or realestate type websites and most are very easy to use. Knowing your personal financial situation, and learning some basic mortgage calculations can level the playing field and very possibly save you lots of money.
By learning how to use a basic mortgage calculator you can easily understand the basics of mortagage loans.
Online Mortgage Calculator �The Basics
Monthly Payment - Probably the simplest function of a good online mortgage calculator is calculating your month to month house payment.
You'll need to have these numbers ready:
- The amount you want to borrow
- The interest rate of the loan
- The length of the loan - usually in years or months
All you need to do is type these numbers into the form and submit. The online mortgage calculator will return the amount you will pay monthly based on the criteria you entered.
For instance: The amount you need to borrow, or principle is, $200,000 at 6% interest rate to be paid over 30 years � your monthly payment will be: $1,199.00 per month.
Analyze the Scenario
A good online mortgage calculator will not stop there...
It should return a few other critical numbers, such as:
Total Amount the Borrower Will Pay
In our case above the total amount paid � interest and principal - by the borrower at the end of 30 years will be $431,640.
Total Amount of Interest The Borrower Will Pay
In our case above the total amount of interest the borrower at the end of 30 years will be $231,640 about 53% of the total amount spent is on interest.
Just think how a slight alteration in interest rate can have such a tremendous impact on the total amount paid over the life of the loan!
As the interest rate increased to 7.5%, the total amount paid drastically increases � the total payment now is $503,280, with $303,280 going to interest only! The monthly payment would be around $1398.
Online Mortgage Calculators � Summary
Our basic example shows you how a 1.5% jump in interest rate can cost the buyer over 70 thousand dollars over the life of the loan!
Obviously you'll want the lowest rate when locking into a home loan. The online mortgage calculator arms you with critical knowledge prior to that initial meeting with loan officers or mortgage brokers.
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