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Understanding Mortgage Calculators

Homebuyers, especially first time buyers, will eagerly jump into the mortgage process without completing what is possibly the most important FIRST step in analyzing their specific financial situation, which is: Using a good online mortgage calculator in order to assess their financial situation.

A large percentage of those in the market for homes make it easy for the mortgage brokers to steer homebuyers into accepting deals that are more beneficial to the broker than YOU, the buyer – AND IT’S NO WONDER!

First time homebuyers who are unsure of how these loans actually work many times are easily confused and even overwhelmed with the process and terms. Points, principle, interest rates, interest only loans, ARM, FRM etc... can ALL be confusing.

Why not be prepared by using a good online mortgage calculator prior to actually sitting down and talking with a broker or bank?

There are many on the Internet and most are very easy to use. Knowing your personal financial situation, and learning some basic mortgage calculations can level the playing field and very possibly save you lots of money.

By learning how to use a basic mortgage calculator you can easily understand the basics of mortagage loans.

Online Mortgage Calculator –The Basics

Monthly Payment - the most basic job of a good online mortgage calculator is calculating your month to month house payment.

Here's what you need to input:
- The amount you want to borrow
- The interest rate of the loan
- The length of the loan - usually in years or months

You’ll simply enter these three numbers into the form and submit. The calculator will then process the three variables, principle, interest and length of loan and will return the amount you will pay monthly based on the criteria you entered.

For example: The amount you need to borrow, or principle is, $200,000 at 6% interest rate to be paid over 30 years – your monthly payment will be: $1,199.00 per month.

Analyze the Scenario

A good online mortgage calculator will not stop there...

Most programs also return a few other critical numbers, such as:

Total Amount the Borrower Will Pay

In our case above the total amount paid – interest and principal - by the borrower at the end of 30 years will be $431,640.

Total Amount of Interest The Borrower Will Pay

In our case above the total amount of interest the borrower at the end of 30 years will be $231,640 about 53% of the total amount spent is on interest.

Many are amazed how this seemingly slight numeric change in interest rate can have such a major and powerful influence on the total amount paid over the life of the loan!

In the above situation, with a jump in interest rate to 7.5%, the total amount paid drastically increases – the total payment now is $503,280, with $303,280 going to interest only! The monthly payment would be around $1398.

Online Mortgage Calculators – Summary

This example clearly illustrates how a 1.5% jump in interest rate can cost the buyer over 70 thousand dollars over the life of the loan!

Once you understand how interest rates drastically effect your monthly payment, striving for the lowest rate possible is a worthy goal. The online mortgage calculator arms you with critical knowledge prior to that initial meeting with loan officers or mortgage brokers.

Article Source: http://www.articlemap.com

For 15 years Leslie Collins has been helping all types of borrowers get the loan information they need to make the best home buying decision . Please visit the easy to use mortgage calculator before you talk to banks or loan officers.

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