It’s true, a mortgage calculator can help you determine the most sensible loan for your financial strategy. Nevertheless, if you bump into the wrong loan calculator, you may be doing the numbers completely wrong. After reading this article, you’ll be able to choose the calculator that suits your purposes. Take a peek and find out for yourself!
What you should pay attention to
Before relying blindly on a loan calculator you stumbled upon online, make sure it’s a steady tool for calculating your finances. To do so, check the following:
#1- Payments included
The mortgage calculator you use to define your monthly payments can’t just require you to fill in with the principal and the interest rate. It wouldn’t be accurate, since monthly mortgage payments also include real estate taxes, private mortgage insurance and insurance.
Did you know you may be subject to tax deductions from your mortgage interest rate? For instance, if you’re paying 25 percent in taxes at the margin, you may turn your 4 percent interest rate into a 3 percent interest rate. Does the loan calculator take that into consideration?
#3- Closing costs
When you finish paying off your mortgage, you’ll have to pay what in the insurance world is called ‘closing costs’, that is, additional costs that aren’t included in your monthly payments. The cost of closing your mortgage may vary depending on your location and down payment and, of course, depending on your lender. Some lenders, like Bank of America, offer a closing calculator, so it may be wise to look for one in your loan provider’s website.
#4- Homeowners Association fees
Maybe your property doesn’t demand HOA fees payment (it’s mostly targeted for condo owners), but you have to make sure you won’t be subject to them. Will HOA fees make a difference in the result provided by a mortgage calculator? Well, yes, since these fees range from $200 to $400 a month.
Types of online mortgage calculators
Mortgage payment calculator
This is the most common type of mortgage calculator. You use it to check what your monthly payment will be. In order to do so, you’ll have to enter the principal (the amount of money of the loan), the interest amount, whether it’s a fixed or variable interest rate and the length of time for the debt to be paid off.
Mortgage refinance calculator
If your current loan payment plan isn’t working out for you, you may be considering refinancing it. A mortgage calculator can be a handy tool to define whether you want to change from an adjustable rate to a fixed rate or vice versa. Take into consideration that you’ll have to find out for which interest rate you qualify for.
Second mortgage calculator
It’s not a straightforward calculator, but it’ll help you define whether taking out a second mortgage is advisable for your specific case. By entering the required numbers, you’ll be able to plan out your monthly payments and take the smartest route.
Now that you know the difference a loan calculator can make in your financial plans, you’ll no doubt double-check before settling for one!