If you want to purchase a home on loan and want to know how much you can afford to pay towards your mortgage, you can take help of mortgage calculators.
How a mortgage calculator works
Prior to going to a lender, you can figure out how much a mortgage is going to cost you, by using mortgage calculators. You need to put information about your cost of the house, current interest rate, loan term, etc, and the calculator will calculate and give you an idea about the amount you have to pay each month. Depending on your needs, you can take help of any type of calculator. The different types of calculator available are: interest-only mortgage calculator, amortization calculator, debt consolidation calculator, borrowing calculator, cost calculator, repayment calculator, and many more.
An example:
If to purchase a home costing $300,000, the amount of loan you will apply for is $250,000, the loan term is 30 years, interest rate is 6.5%, property tax is 1.25% and PMI is 0.5% and you start making payment towards your mortgage from March, 2010, your monthly mortgage payment will be $1,944.75. You will have to make 360 payments in total, which amounts to $700,111.22. The total interest you will pay is $333,548.72 and your pay off date will be February, 2040. You will have to make 39 monthly PMI payments of $104.17 each and your PMI pay off date will be June, 2013. The total tax amount you will pay will be $112,500.
Thus, using the calculator you will have a clear idea, how much the mortgage is going to cost you and whether or not it will be according to your affordability.
Benefits of using a calculator
Though mortgage calculators give you an idea about your monthly mortgage payment, it is not absolutely correct all the time, because, the lenders will also consider your credit report along with other factors before approving the loan. But, in spite of having its limitations, this tool can help you a lot to get a basic idea about your mortgage payments.
