When considering buying a home or refinancing a current mortgage, taking the time to fully understand payments over the term of the loan will be an important step. Too often people assume that if they qualify for a loan at a pre-set limit, they can afford to buy a home up to that maximum price.
The reality is that your income level can change at any point in time. A person can lose a job or have hours cut, become ill, decide to have a family or any other number of issues that may lower income in the future. Additionally, and this is often overlooked, the mortgage is only one of the many payments that will need to be made on a monthly basis.
A Good Guideline
A very good basic guideline for mortgage payments can be found through a mortgage payment calculator. These online tools are very simple and allow the homeowner or potential home buyer to input the loan amount, the appraised value of the home, the term of the loan and the interest rates as well as the property tax and insurance.
This will then provide a breakdown of the total payment. Most of the top online mortgage payment calculator tools will identify the principal and interest paid and the taxes and insurance and then provide a total.
To get an idea how things change, vary the term and the loan amount, which are the two variables in your control. The appraised value cannot change, nor will the interest rate, tax or insurance. For some buyers, if it is possible to wait to purchase a home until they achieve a higher credit score, the interest rate can be lowered.
In addition to the inputs possible with the mortgage payment calculator, there will also be the need to pay monthly bills for the home and to also address other debts and payments outside of the mortgage. These are essential considerations to keep in mind and is typically not included in the payment calculation.
For easy calculations, use the mortgage payment calculator offered at Guaranteed Rate. They can also work directly with borrowers to determine the best loan option for their financial situation.
