How Do I Use A Mortgage Calculator?
When shopping for a mortgage, there are so many tools that you can use to educate yourself about the process, know how much you can afford and plan ahead. One of these is the mortgage calculator. With the help of a mortgage calculator, you can know how much a particular property will cost and whether you can afford the home loan. There are so many different mortgage calculators online and they each come with a number of features to simplify the shopping experience for potential homeowners. We’ll take a look at some common uses of mortgage calculators today.
Check Different Loan Types
When looking for a loan to finance your new home, you’ll have to choose from two major categories, a fixed rate mortgage or variable rate mortgage. The loan calculator can show you estimates depending on the loan type you choose. When you choose a different loan type (fixed rate or variable rate), you will notice that the payment will automatically change. This can help you to decide which type of loan is right for your unique situation. For instance, if you select a fixed rate loan of say 30 years, you are likely to pay the lowest amount but high-interest rate. Also, with an adjustable rate mortgage, your monthly payment can increase once a fixed period ends so always ensure you know how much the payments could increase and take a loan that is sustainable.
Compare Different Interest Rates
The mortgage calculator can help you to see the difference in your monthly mortgage payment when you choose lenders with different interest rates. You can simply enter different interest rates in the calculator to see how the monthly payments change. By seeing the impact of having a low or high-interest rate, your better placed to shop around for a mortgage that works for you.
Understand Where Your Money Goes
When you make a monthly payment for your mortgage, the entire amount doesn’t go into paying for the loan. Mortgages consist of different costs. For this reason a mortgage calculator can help you understand how much you’ll pay back as principal, interest, taxes, and insurance where applicable. Some mortgage calculators actually break down the results to show you how much you pay for each of these items.
Know How Much Interest You’ll
An affordable mortgage, to most people, is one that gives you a low-interest payment in the long term. With a mortgage calculator, you can actually get an estimate of how much interest you will pay over the life of your loan. Lenders usually allow you to pay the most interest at the beginning so that it reduces considerably as you approach the end of the loan term.
Get An Idea of the Impact of Your Down Payment
Perhaps putting a larger down payment will reduce your monthly payments and make the home more affordable. That is why a mortgage calculator can help you to get these estimates helping you decide on the down payment to offer on a new home. In fact, a high down payment can sometimes help you to qualify for a lower interest rate.
If you are contemplating using a mortgage calculator, or want some help understanding what you can afford, please contact me directly.
Patrick Palmer: The Mortgage Cat
Licensed Mortgage Agent (Lic.#16000311)
South Oakville Centre, 1515 Rebecca Street, Unit c33, Oakville, ON L6L 5G8