Using a Mortgage Calculator to Understand Your Home Loan Options September 01, 2021 Mortgage 101
When considering buying a home or refinancing your current mortgage, it can be hard to know where to start and how to tell what the right decision is. While talking to a mortgage lender is always going to be your best bet for truly figuring out how much your home loan may be or if it is the right time to refinance, mortgage calculators can provide insight into what your options are before consulting a professional.
What is a Mortgage Calculator?
Mortgage calculators are online tools that help you get a better sense of what you can afford, how a mortgage would impact your overall finances, and how refinancing your existing mortgage could save you money. By entering some information about your unique financial situation and mortgage specifics, you can see totals and projections that can help answer your questions. The goal of a mortgage calculator is to provide you with hypothetical scenarios that will help you make smart, informed decisions about buying a home or refinancing.
How Can a Mortgage Calculator Help?
Mortgage calculators provide you with potential outcomes based on the fields you input and can give you details on loan amounts, interest rates, mortgage terms, down payments. homeowner’s insurance, your income and expenses, etc. Mortgage calculators allow you to create different situations like what the difference would be if you went with a 15-year mortgage versus a 30-year mortgage? Or what if you wanted to purchase a $350,000 home compared to a home that is $250,000? By using a mortgage calculator, you can see the impact these different decisions would have on you financially.
Types of Mortgage Calculators
First Home Mortgage offers a number of different mortgage calculators that can help you make sound financial decisions including:
- Calculate a Mortgage Payment
- This is arguably the most common mortgage calculator. This calculator is used to show you how much you could expect to pay based on the specifics of a loan including purchase price, down payment, annual property tax, loan term, interest rate, and more.
- Rent or Buy?
- This calculator shows you the advantage of buying a home over renting or renting a home over buying depending on how much you pay in rent and renter’s insurance and how much you would pay with a mortgage over a certain term.
- Proceeds from Sale of a Home
- This calculator shows you how much you can expect to profit from your home sale. It factors in things like your mortgage balance, property taxes, and realtor’s commission.
- Home Affordability
- The home affordability calculator generates three key ratios: loan-to-value (LTV) ratio, housing ratio, and debt-to-income (DTI) ratio. Lenders look at these three ratios when determining whether you qualify for a home loan. LTV is the ratio of the loan amount to the home value, the housing ratio represents the percentage of your income that goes towards housing expenses, and DTI expresses your total debts and housing expenses as a percentage of your total income.
- Compare Two Mortgage Loans
- This calculator allows you to look at the estimated closing costs, home loan amount, and monthly payments for two loans side by side. This gives you an idea of which loan will cost more in the long run.
- Adjustable Rate Mortgage Analyzer
- This adjustable-rate mortgage loan analyzer helps you understand the long-term effects of choosing an adjustable rate and how much you can expect to pay as your rate changes over the term of your home loan.
- Time to Refinance?
- Deciding whether to refinance isn’t always a clear-cut decision. This calculator helps you see the total cost over the life of your current loan versus a new loan by seeing the loan amount and monthly payments based on factors including interest rate, closing costs, and term.
- Compare a Bi-Weekly Mortgage to a Monthly Mortgage
- This mortgage calculator shows you the payment, total interest, and total number of months it would take to pay off a mortgage loan with monthly payments versus bi-weekly payments so you can decide which option makes the most sense for you.
- Debt-to-Income Calculator
- As mentioned, debt-to-income ratio is an important factor that lenders look at when determining your loan eligibility. This calculator generates your DTI and says whether it is at a manageable level or needs to be improved.
Are you interested in crunching some numbers to see what life would be like with a new or improved mortgage loan? Check out First Home Mortgage’s range of mortgage calculators and contact one of our Loan Officers when you are ready to learn more and discuss your options based on your findings from these loan calculators.
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