When you are thinking of buying a home, it is a good idea to do some math to find out your budget. Lenders have developed tools like online calculators to help borrowers figure out their monthly payments, down payment required and other factors.
More often than not, borrowers try to buy a home that is priced relatively high and near the limit of their affordability. A calculator is useful even if you are considering refinancing the loan or paying off the mortgage early.
Why using a home loan calculator is a smart idea
Regardless of whether you are in the market for a new home or refinancing an existing mortgage, a calculator can help. A home loan calculator helps you make decisions confidently and comfortably. Making the right financial decision is important because:
- Home ownership is the biggest decision and investment a person makes in their life
- Stretching beyond one’s financial capacity or having the wrong mortgage can be traumatic
- Being educated about the multiple mortgage options offers peace of mind and keeps the onus on you as a borrower and not the loan officer
- Understanding the risks, costs, and benefits of a home loan is easier with the help of a loan calculator
- These calculators are very easy to comprehend and use
Using a loan calculator helps you as a borrower to do the following:
- Figure out how much you can afford to pay for a home
- Helps to calculate your possible monthly payment which includes the following components – principal, insurance, interest, etc.
- Calculate the interest you will pay over the life of a loan
- You can get insights into what other mortgages would cost like ARMs, Interest Only and Balloon mortgages and evaluate the risks
- Decide the term of your mortgage and how to save money by making extra payments
- Evaluate the impact of refinancing or switching from one loan type to another
Maintaining financial health and good credit scores is very important as it impacts every aspect of life, most especially the ability to get good loans. Since tools are already available and easy to use, it makes sense to use them to help you stay on track.