In most instances when you are purchasing a house, you will be expected to pay a down payment. This is an amount that is expected to be paid in cash when finalizing the transaction. This amount will be used by the lender in case you default to pay. Once you have made a down payment on the asset, you can now use it as collateral to borrow a loan from a financial institutions. A down payment shows that you have the ability to raise some money and that you are financially sound and that you will eventually be able to pay the mortgage loan. IF you are not able to pay fully for the loan, you will end up losing the down payment amount.
Your monthly payment will include four variables. These variables are principal, property tax, home insurance and interest. An interest is the overall cost of borrowing. It is the difference between the total payment you make and the principal amount you borrowed. Different lenders will offer loans at different interest rates and it is advisable to go for the one with the least. Interest rates will be used by the mortgage calculator to determine different values such as the instalment payments and total payment amount. A mortgage calculator will assist you to calculate adjustable interest rates. This is especially applicable in loans such as the pick a payment’ program. However, you should be very careful with this calculation as the wrong choice can make you end up paying much more than your house is worth.
An income tax is the percentage of your earnings that the government deducts as tax. Most lenders will require you to submit a tax return form as this clearly shows your income pattern. The lender will need to know that you are capable of paying the loan after the tax deductions have been made. The lender will use the tax returns to look for evidence of loan fraud and income irregularities if any. Lenders will feel more comfortable if you always pay your income tax on time. A mortgage calculator will use the income tax to calculate your net income in which loan payment deductions can be made. Net income is obtained by subtracting the tax from the gross income.
Your monthly mortgage payment will include a twelfth of the annual property tax. Most lenders will pay the property tax themselves and include the amount in your monthly income. When determining how much mortgage payment you can be able to pay, it is always advisable to incorporate property tax as it will be a part of what you are expected to pay each month. This value will be required to calculate your monthly payment using the mortgage calculator.
Mortgage insurance is aimed to compensate the lender in case the borrower defaults to pay the mortgage loan. Depending on the insurer, the insurance can either be private or public. Some insurers can allow you to cancel the private mortgage insurance once the amount you owe the lender goes below a certain amount. The main use of insurance payment is so that the lender can have an extra amount of money if in case you are late with your payment or if your property assessment is increased.
In summary, your mortgage calculator will help you know how much the expected monthly payment in any loan arrangement is putting into account the mortgage amount, the payment period in years, the interest rates. The property taxes and the mortgage insurance. You will only be required to enter these figures and the value of the monthly payment will be calculated for you.It is advisable to seek good advice.