Wednesday, June 16, 2010

Home mortgage calculator – helping you to assess your affordability

Using a home mortgage calculator is something that you cannot avoid if you are planning to buy a home. And borrowers usually cannot do without one. It is very important to use a mortgage calculator as your finances play a vital role in the home buying process. So, what are the different home mortgage calculators you need to use if you are planning to step into the mortgage market? There are different types of mortgage calculators that you can use so that you can decide how you will plan out your finances.

Sometimes consumers are unable to decide whether it is better to buy or rent a house. You can find out which is a better option, if you use a rent or buy calculator. Few other aspects that are taken into account when you take out a mortgage include the following –

Which is better- An adjustable-rate mortgage or fixed-rate mortgage?

An adjustable-rate mortgage (ARM) is good in the initial years of the mortgage. This is because you have to pay less in the beginning. But ARM is tied to the prevailing mortgage rates in the market, so if it rises, your payments will rise and if the mortgage rates drop, your payments will be reduced too. Your mortgage payments are never stabilized.

If you opt for fixed-rate mortgage (FRM), your payments will be fixed throughout the term of the loan. So, you can find out the difference in the payment you will be required to make if you opt for ARM instead of FRM and vice versa. A home mortgage calculator can help you in this regard.

What should be the loan term?

Often borrowers are unable to decide whether a 15-year loan term or a 30-year loan term will be more beneficial. If a borrower opts for 15-year loan term, the amount that he has to pay each month will be very high. Nevertheless, the rate of interest the mortgage will attract will be very low. On the other hand, a 30-year loan term will allow you to pay less each month but the interest rate will be high.

What is the APR and how will it affect your finances?
Although mortgage APR or Annual Percentage Rate doesn’t affect your monthly mortgage payments but it gives you the total cost of the loan.

If you want to settle for a good mortgage, it is important that you take into account the factors that determine your repayment. In this way you can assess your affordability and settle for a mortgage that will not strain your wallet. You can access home mortgage calculator from different websites that offer them free.

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