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Archive for the ‘mortgage calculator’ Category

There are a variety of mortgage loans that are available to homeowners who want to purchase a home. It’s important to be aware of the various loan options so that you can make the best decision based on your long term goals and the monthly payment you can afford. Here are the top five mortgages to be familiar with.

Fixed Rate Mortgage

A fixed rate mortgage is exactly as it sounds; your monthly payment will be fixed over a period, generally 30 years, although you can take out a fixed mortgage for 15 or 10 years. The interest rate does not change over this time, which makes this mortgage the safest, most popular choice. In fact, fixed rate mortgages account for 75 percent of all loans. Their greatest advantage is that the homeowner knows exactly what their monthly payment will be.

Some homeowners worry that by taking out a fixed rate mortgage, they won’t be able to take advantage of lower interest rates if the rates do go down. The good news is that with a fixed rate mortgage, the homeowner can refinance. The only stipulation is that the homeowner has to pay closing fees. Although fixed rate mortgages are predictable and widespread, they do have higher interest rates than with other loans.

The first payments will go mostly toward interest, providing you with a better tax break early on. As time passes however, more of your payment will go toward the principal instead of the interest. Nevertheless, your payment will always stay the same. Fixed rate mortgages are best for borrowers that intend to stay in their homes long-term and appreciate the stability of fixed monthly payments.

One Year Adjustable Rate Mortgage

A one year adjustable rate mortgage has an interest rate that fluctuates based on the market. The advantage to this loan is that the interest rate is lower than what you pay for a 30 year fixed mortgage. Also, homeowners can qualify for a larger loan amount while having a smaller monthly payment, allowing them to get a more valuable home for less.

The drawback to a one year adjustable rate mortgage is that the loan is unpredictable. One year a homeowner may be paying a small mortgage, but the monthly payment can skyrocket the next. Each year on the anniversary of the loan, the payment changes according to a specific schedule that occurs after the fixed period at the beginning of the loan.

For some borrowers, an adjustable rate mortgage is a great option, even though it’s not as steady. If you’re someone that needs the lowest possible payments over the term of your loan, planning on transferring over your home in the near future or require the flexibility of loan terms, an adjustable rate mortgage may be a great choice for your situation. Also, you can pay off the principal of your loan without being faced with prepayment penalties.

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A mortgage loan is probably the largest loan you will ever take on, and certainly the most complex. Getting a loan these days is not easy, but with a bit of planning and preparation, you stand a better chance of getting the loan you want.

Our tips for getting the mortgage you want:

• Before you request a rate quote , do your homework. Do some looking around to see what interest rates are and begin to think about the type of loan you need. It is a good idea to use a mortgage calculator to help you to get an initial idea of how much you can afford in a monthly payment. However, read our prior blog post for a few words of caution regarding mortgage calculators.
  
• Ensure your credit report looks good and is accurate. Avoid making significant purchases at this point and pay down the debt you have. You want the best credit score possible before you apply.
• Contact a national or local financial institution, mortgage lender or credit union and request a quote. A quote should not require any cost to you, but it will tell you what the lender can offer to you. You want to compare loans from several companies.
• Determine the down payment requirements. Most lenders require 20 or more percent from homebuyers unless you obtain mortgage insurance (MI) which can drastically impact the terms of your loan.
  
• Negotiate to get the lowest interest rate possible and the terms you want. You may get the lower to cover some of the closing costs, too. The key here is to ask for the best offer possible.
• Provide all documentation to back up the details you provide on your mortgage application. You want to ensure you have the most up to date information because the lender will require verification.

Don’t try to “do it yourself”

Getting a mortgage loan is definitely not a DIY process these days. With the changes to the lending market in recent years, it’s never been more important to talk to a qualified, professional loan officer to help you make an informed decision about this important investment.

It is important for anyone who is considering obtaining a home mortgage to learn how to calculate monthly mortgage payments or the amount of money you pay each month to buy your home. A variety of factors play a role in what this cost will be, including your interest rate, the length of the loan, your creditworthiness and the current lender’s requirements. 

More complicated than you might think

The problem with learning how to calculate monthly mortgage payments is that the process is pretty complex mathematically. In short, your loan is not the principle borrowed amount divided by the number of monthly payments. However interest plays a significant role in this process.

The real issue is that the interest on a mortgage loan is compounding, which means that it applies to the current balance of the loan. Also important is the fact that most of your monthly payment starts out with being interest payment while over time, the percentage you pay each month increases until you are paying nearly all principle.

Making It Faster

So, how can you calculate the monthly mortgage payment you are likely to pay? A good place to start is with a mortgage calculator. Many of these can be found online and are free of charge. None of your personal information is gathered in this process, and all you will just need to enter the terms for a loan you are considering and it will do all of the mathematical work for you.

This method does allow for individuals to get information right away as it does give you an instant quote on basic amounts and rates. It will also allow you to:

• Compare how much of a difference a down payment makes on the loan.
• You can determine how paying over a long period, or a shorter period can affect the monthly payment
• You can compare the interest rates of various loans provided to you by lenders

Nothing beats personal advice

The good news is that an online mortgage calculator is easy to use and can provide you with an estimate about the loan you hope to get. However, be very cautious with the information you find online as it may not apply to your specific situation.

Things to watch out for with online mortgage calculators:

• These online calculators may or may not accurately apply things like taxes, home owners insurance and other fees such as condo dues
• You may not accurately judge the rate you qualify for
• Mortgage insurance may vary depending on the type of loan
• Rates fluctuate daily

Our best advice is to speak to one of our helpful team members and get an exact quote and payment estimate for the home you want.