Purchasing a house requires a lot of money, for which it is often necessary to take out a mortgage. It is very much important to understand how much you can afford while taking out a mortgage. If you fail to make your mortgage payments properly, your house can be taken away from you through foreclosure. Thus, you should have a complete understanding of your financial situation before you take out a mortgage. For this purpose, you can use a mortgage payment calculator. Read along to know more about the beneficial aspects of mortgage payment calculators.
Benefits of mortgage payment calculators
Before taking out a mortgage, you should have a clear understanding of your financial affordability so that you do not face any financial difficulties later on. A mortgage payment calculator can come handy in this regard. There are other benefits of mortgage payment calculators as well. Go through the points given below to know about them:
- Helps you to understand how much you can afford – First and foremost, a mortgage payment calculator’s functionality lies in determining how much house you can afford. Through a mortgage payment calculator, you can calculate the rate of interest you’ll be paying per month. Further, by adding some crucial details regarding interest rate, deposit amount and term of the loan, you’ll get an idea regarding how much you can afford.
- Predicts about payment in case of adjustable-rate mortgage – If you’ve decided to take out an adjustable-rate mortgage, then your monthly payments will start fluctuating after a certain period of time. Adjustable-rate mortgage usually starts with a low monthly payment which remains fixed in the initial period. Afterwards, the interest rate starts to fluctuate and the required monthly payments may become much bigger. Through a mortgage payment calculator, you can figure out how much the monthly interest rates for an adjustable-rate mortgage can go up.
- Helps you to figure out when you can eliminate private mortgage insurance – While purchasing a house, if you deliver a down payment of less than 20% of the house’s purchase price, it is most likely that you’ll have to buy private mortgage insurance. A mortgage payment calculator will help you to understand when the house’s equity will reach 20 %, so that you’ll know when you can ask your lender to wave off PMI.
- Helps you to understand whether refinancing a mortgage can be beneficial or not – This goes for those who have already taken out a mortgage. If you’re facing difficulty in making monthly mortgage payments, you can opt for mortgage refinance as it can lower your monthly payments. It involves replacement of the existing loan with a new one, which consists of more favorable terms and conditions. A mortgage payment calculator will help you to understand whether a new loan will actually be more favorable for you and whether it will help to save money on your payments.
Thus, mortgage payment calculators are very useful tools. Whether you’re taking out a mortgage for the first time or refinancing an existing one, you can get benefited by using a mortgage calculator.