By: Yara Zakharia, Esq.One of the most momentous decisions in an individual's life is the purchase of a home. For many prospective homeowners, finding a suitable residence and loan to correspond to their budget is a key step in turning the American dream into a reality. Facilitating the decision-making process for future borrowers and accommodating their needs for affordable housing is a tool called the mortgage payment calculator. It takes into account specific figures relating to loan, property, and rental data. Whether refinancing a loan or buying a house, consumers can weigh the benefits and costs of their contemplated move by utilizing a mortgage calculator. When mortgage rates change, borrowers need not contact their broker; rather, they can simply electronically input a few variables requested by an online mortgage calculator and obtain instantaneous financial calculations. This electronic program allows consumers to enter different loan values, such as amount of deposit, and mortgage rates to compare payments.
Thousands of websites offer free mortgage rate calculators, which educate prospective home seekers on a wide range of mortgage scenarios and deliver nearly fool-proof results on projected mortgage payments. Mortgage rate calculators are very user-friendly and easy to operate.
There are numerous benefits to using a home mortgage calculator, and they include the following:
- Finding out the loan amount you qualify for
- Comparing monthly payments for a variety of mortgage terms, interest rates, and loan amounts to find the package that offers the lowest monthly payment
- Discovering how even small changes to variables such as interest rate and loan balance can impact the monthly payment
- Obtaining an amortization table that sets forth future mortgage payments and accruing interest
- Contrasting different loan programs recommended by one's broker (i.e. 15 versus 30-year mortgage)
- Determining whether it would be beneficial to refinance or not
- Calculating the principal and interest to be paid
- Discovering how much home one can afford
- Computing the effect of any pre-payments towards the principal
- Assessing whether it would be more advantageous to rent or buy
To calculate a mortgage via a standard calculator, prospective homeowners must typically enter the following fields:
- Annual interest rate
- Start date of the mortgage
- Repayment period or loan term (in years or months)
- Principal or loan amount
Some mortgage rate calculators contain additional mandatory or optional fields such as:
- Interest rate cap on an interest-only ARM
- Interest rate cap on an ARM
- New rate of interest for refinance loan
- Index rate adjustment
- Lenders' margin tacked on to the index rate
- Time interval between index rate adjustments
- Current index rate
- Title closing fee
- Recording fee
- Title insurance
- Credit report
- Lender fees
- Origination fee
- Discount points
- Months remaining
- Monthly or annual real estate taxes
- Private mortgage insurance (PMI)
- Annual homeowner's insurance
- Price of home
Consumers may choose from a multitude of specialized calculators including the following:
Interest-only mortgage calculator
This tool informs consumers of the principal and interest rate payments they must make upon termination of the introductory period of an interest-only mortgage.
Balloon mortgage calculator
This calculator allows borrowers to ascertain the amount of their monthly payments and their outstanding balance when the loan is due and the balloon payment matures.
Amortization calculator
Consumers can discover the length of time needed to pay off their loan balance (interest and principal) with the assistance of an amortization calculator.
Fixed rate v. interest-only mortgage calculator
With this calculator, borrowers can compare payments on an interest-only home loan with those on a fixed-rate mortgage.
Adjustable rate mortgage calculator
Consumers with an adjustable rate mortgage can find out the amount of their initial monthly payment as well as the effect of future rate adjustments on the former.
Refinance interest savings calculator
Borrowers can determine whether refinancing their existing mortgage at a lower mortgage rate is profitable by utilizing this calculator, which reveals the potential savings from the new loan's interest and monthly payment. The refinance interest savings calculator also informs consumers of the time needed to recoup the closing costs or achieve the break-even point.
Monthly versus bi-weekly mortgage payments calculator
Prospective homeowners can find out how much interest savings may be reaped from making bi-weekly instead of monthly mortgage payments.
Cash-out refinance calculator
Individuals seeking to consolidate consumer debt (i.e. credit card and/or auto debt) into a new home loan can utilize this calculator to find out the reduction in interest costs and mortgage payments generated by a cash-out refinance.
Fixed-rate versus adjustable-rate mortgage calculator
This offers a comparison of the monthly payments on an adjustable rate mortgage to those on a fixed rate mortgage. This calculator allows prospective borrowers to look beyond the initial difference in monthly payment.
Mortgage term comparison calculator
This tool compares the interest costs and monthly payments of home loans at different repayment periods.
APR mortgage calculator
This closing cost calculator enables prospective homeowners to compute the annual percentage rate (APR) and compare loans with different terms, fees, points, or mortgage rates.
