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Choosing a loan without using a mortgage calculator can cost THOUSANDS of dollars. That’s why it makes sense to use one before performing any obligations. Here is a brief overview of the 3 types of calculator and the benefits of using them.
Affordability Calculator
A good way to start is to know that what is being proposed is within your ability to pay. To answer this question you need to know how much the monthly payment will be on the proposed loan. Using a mortgage calculator will help you get that loan amount repaired over a long period of time. With a mortgage calculator that value becomes a four-step process.
Step 1: Collect and enter the following calculator information: loan amount, interest rate, long term (i.e., how many years?), Minimum payment (one dollar or percentage), and estimated front and back rates. [NOTE: Preliminary rate is your proposed housing cost divided by your total income. Expenditure limit is your proposed housing cost% 2B other liabilities, divided by total income.]
Step 2: List and enter the total amount of your entire source of income.
Step 3: List and enter in the calculator how much you pay each month for any other debt you owe. Examples are: car loans, student loans, and other revolving account installments (eg credit cards)
Step 4: Enter annual taxes, annual insurance, and annual PMI (private property insurance)
Once this information has been entered into the mortgage calculator it takes it there. It will give you a very close estimate of what the monthly loan payment will be.
Mortgage Length Calculator
People are often shocked when they find out the exact amount of money they will repay to a lender once the final loan payment has been made. This amount will depend largely on the type of loan you have, as well as the contractual agreement on how additional payments are handled. The mortgage length calculator will show you the effect of additional payments (or vice versa - missed payments) on actual loan costs.
If you start paying more or less on your loan amount each month than at the beginning of the agreed month, you can save or increase the amount of years over the loan amount. This is good news. How would it affect your decisions if you knew that the $ 50 a month difference could save OR MAKE a few years in the length of your contract?
Bi-Weekly Mortgage Calculator
Here's a great example of how using a loan calculator can help you turn the tables and get the best out of your mortgage negotiations. Take out all the loans you receive and calculate the effect of the loan rate compared to the two-week loan debt. With a two-week loan you can save monthly payments for a few years, which can amount to a few thousand dollars.
You will not only save by reducing the number of payments - a few payments will save you the amount of compound interest deducted.
In short, a mortgage calculator gives you the ability to make sound financial decisions that can affect your life for many years to come. And we have not even scratched many other types of calculators and how they can be used.
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