A mortgage loan calculator gives you a tremendous advantage when negotiating a new loan with your lender.? If you want the best mortgage rates when you refinance, nothing beats knowing how to compare offers you may get from different lenders or brokers.? This article is loaded with tips on how to use a mortgage calculator to make sure you come out ahead? before refinancing or modifying your loan.
Here are 3 common scenarios where using a mortgage calculator can help you decide what to do …
1.? Should I Refinance?
First, determine your main goal.? For example:? Are you more concerned with short term savings – (reducing your monthly payment now), or, do you want to save more money in the long run? .
For example. If you had a 30 year loan at 5% interest, and you’d been making monthly payments on it for the last 5 years (60 months), you’d reduce your monthly payment if you refinanced for a new 30 year period, say at 4.5%.
But you could still end up paying more over the long run.? The problem is you have no way of knowing that until all the related expenses are factored in.? And this is where a mortgage loan calculator can help you.? The calculator has places for you to input the various closing costs, fees, taxes, etc. And only after considering all the related expenses will you know whether or not you’re coming out ahead.
2.? How Much Income Will I Need to Qualify?
Nothing feels worse than finding the home of? your dreams and then being turned down when you try to arrange financing.? Once again, this is a case where using a mortgage calculator can really help.? Wouldn’t you rather know if you can qualify for the loan before you apply?
Here’s what you’ll need to know …
First:? the cost of the home;? the expected interest rate;? the term of the mortgage (i.e., how many years?);? and your down payment.? This will show you the total monthly payment on the principal and interest.? But you’re not finished yet!
Next, add in the annual property taxes and annual insurance costs.? Using all the above criteria the calculator will tell you what your gross monthly income needs to be in order to qualify for a loan on your dream home.
3.? Should I Rent or Buy?
Remember the days when we were told that buying a home is ALWAYS a good investment?? Emotionally that’s probably true.? But it’s not always the case mathematically.? Sometimes you’re better off renting, especially in uncertain times.
Here’s how to know …
First, understand you’re going to be using your “best guess” estimates.? But with a little research you should be able to come pretty close (most of the research simply involves presenting a couple of questions to a knowledgeable realtor or property manager).? Here are the questions on the home ownership side of the equation:
What annual maintenance costs are typical for a home like this?? What’s the annual appreciation %? I could expect on this property?? What % selling costs should I expect?? What are the annual taxes and insurance?? What is the PMI (private mortgage insurance).
Your rental questions are much simpler.? First, – how many years do you plan on being in the home before selling?? Second, how much is the monthly rental payment?? And third, what is the annual rate increase % expected to rent this home?? Now you’re ready.
Using all the factors above a mortgage calculator will tell you — 1.? The total of the payments you’d make buying vs renting, 2.? the total you’d save on rent, and,? 3. the total home purchase benefits.? This will help you make an objective decision based solely upon the financial implications.
Other Uses? ?
Other ways you can use a mortgage calculator include finding answers to the following:? What would the monthly payment be?? What is the mortgage principal?? What if I pay extra each month?? Should I pay points to lower my interest rate?? Which loan is better between two or more offers?? What difference would a bi-weekly mortgage vs. a standard mortgage make?
As you may imagine we haven’t even “scratched the surface” of the many benefits of using a mortgage calculator.? They can pay off handsomely.