Introduction to the Home Loan Calculator and Home Equity Loan Calculator
Buying a house is without a doubt one of the most exciting financial adventures that most of us ever take.
Becoming a home owner is one of those defining investments that can either secure our financial future or cause us thirty years of headaches.
One of the biggest mistakes people can make when purchasing a home is not completely understanding the debt burden that a mortgage creates.
Using a home loan calculator or a home equity loan calculator is the best way to avoid that pitfall.
A home mortgage calculator is a simple tool that will show you in plain and simple language the breakdown of the loan on your home.
There are a number of home loan calculators on the internet, from payment calculators for homes that simply show you how your monthly payments are dispersed to more complex instruments that include primary mortgage insurance rates and homeowner association fees.
In this brief article, AdvisoryHQ will help you understand why it is important to use a home mortgage calculator.
And because of the many options out there, we will also let you know what characteristics to look for in a home loan mortgage calculator. For those buyers who choose to use home loan calculators with more sophisticated and complex options, we will also give you a short rundown on how to use these home mortgage payment calculators.
Lastly, we will review three of the best home mortgage calculators and home equity loan calculators on the web as well as looking at specific banks that offer their own home loan calculators on their websites.
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Why It Is Important to Use a Home Mortgage Calculator
In an ideal world, banking institutions would play an important part in the financial education of their clients.
The reality, however, is that many banks are simply interested in getting you to sign the dotted line without reading the fine print. The mortgage crisis of 2008 was caused by a number of factors, but one of the most important issues was the intersection of banks giving out subprime loans to buyers who really had no idea what they were getting in to.
If the bank that you choose for your home loan or home equity loan does not offer you the detailed information you need regarding your loan, then home mortgage calculators are simple tools that can help you understand the details of what signing a mortgage really entails.
While the federal government has tried to crack down on subprime loans that many banks give out, it is still important for home buyers to educate themselves. Using a home loan calculator for first-time buyers or a home equity loan calculator for people seeking out a home equity loan will help you to understand the financial burden that you are undertaking.
Furthermore, since many online home loan calculators also list the current interest rates for mortgages on the market, using a home loan mortgage calculator is an essential tool in your search for the best bank to do business with. By taking the time to learn how to use a home loan payment calculator, you can protect yourself from the predatory lenders that still exist out there.
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What to Look for in a Home Loan Payment Calculator
Not all home loan calculators are made the same because not all mortgages are the same. In this section, we will look at what type of home loan calculator is best for your particular needs.
First of all, it is important to understand the difference between a home mortgage calculator and a home equity loan calculator. Home mortgage calculators will help you determine the monthly payments, interest rates, time until amortization, and other basic fees associated with the initial financing of the house you buy.
“[A] home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral. The loan amount is determined by the value of the property, and the value of the property is determined by an appraiser from the lending institution.”
Since interest rates and payment schedules are usually quite different between an initial mortgage and a home equity loan, home equity loan calculators are needed if you are seeking out a home equity loan.
If you have a longstanding relationship with the bank that financed your mortgage, then you may not need a complex home loan mortgage calculator that has a number of plug-in options. If you only need to follow up on simple payment plans, then a home loan payment calculator may be your best bet.
Home mortgage payment calculators will give you the most basic information you need to stay on top of your agreed-upon payment plan.
Image source: Pixabay
However, if you want a more intricate understanding of how your mortgage is calculated, then a simple payment calculator for a home will not offer you the plug-in options you need.
There are a number of home loan calculators that will allow you to add diverse features such as homeowner’s association fees, primary mortgage insurance fees, property tax, home insurance, and other variables that will ultimately affect your mortgage payment and interest rates.
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How to Use a Home Mortgage Payment Calculator
For those buyers who choose home loan mortgage calculators with more complex options, it is important to understand the terms associated with plug-in options.
While using a home loan calculator is as simple as plugging in the numbers and letting the computer do the math for you, you will need to have a basic understanding of the terms that the website uses.
Most home mortgage calculators will ask you to introduce the values associated with the value of your home, your home loan amount, and the interest rate you negotiated with your bank. Almost every mortgage will ask for a down payment of at least 20% of the value.
If, however, you are able to make a larger down payment, you will have less to finance. Furthermore, many banks will offer you a more favorable interest rate if you prove that you can make a large down payment up front.
It is also important that you as a buyer research the interest rate that all home loan payment calculators ask for. Bankrate.com offers a simple home loan calculator that also has a link to the accepted interest rates on the market today.
You can also search on the web for the going interest rates for mortgages in your state or region as interest rates vary widely between one state and the next.
Other online home loan calculators that we will review below will ask you to plug in values for property tax rate, primary mortgage insurance (PMI) rate, home insurance yearly payments, and monthly homeowner’s association fees (HOA). To use these home mortgage calculators correctly, you will need to know what these terms mean.
The bank that is financing your mortgage should be able to tell you your property tax rate. If not, local government offices will provide you with that information. Generally, property tax rates are higher in urban areas and high equity zones than in rural areas.
Primary mortgage insurance rate is often asked for by quality home loan mortgage calculators. This insurance is the bank’s protection in the event that you as a buyer eventually default on your loan.
The lower your initial down payment on your home loan, the higher that your primary mortgage insurance usually is.
Your home insurance yearly payment is also used by many home loan calculators to calculate your monthly payments.
Many banks will give you more favorable interest rates if you are paying for good home insurance as a way to protect your investment. Lastly, people who purchase condominiums or apartments will usually have to pay a homeowner’s association fee that many home loan calculators also ask for.
The Best Home Loan Mortgage Calculator on the Web
For folks who are simply looking for a payment calculator for the home they bought, the home loan calculator offered by bankrate.com is the simplest and easiest home loan payment calculator that we found.
This website only asks for the loan amount, the interest rate and the term of the loan to give you a pretty simple calculation of your monthly payment schedule.
Mortgagecalculator.org offers a more complex home mortgage calculator that allows you to differentiate between the value of the home and the loan amount you are seeking.
Furthermore, this home loan calculator allows you to plug in values for different loan term lengths, the start date of your initial loan, property tax rate, primary mortgage insurance rate, home insurance yearly payments, and your monthly homeowner’s association fee. You can also choose to leave any of these areas blank if they don’t apply to you.
Image source: Pixabay
This quality home mortgage calculator also allows you to see the best mortgage rates on the market today for comparison. In addition to calculating your monthly payments, this home loan calculator also affords you the option of printing out amortization tables just like your bank would.
You can print out a variety of these tables for different interest rates or loan terms to compare which payment plan is best for your personal financial situation.
Financialmentor.com is a quality financial coaching website that has been featured by National Public Radio, Forbes magazine and other high profile publications. As far as home loan calculators go, Financial Mentor offers the largest number of options for calculating the specifics of your mortgage.
This website offers a wide variety of home mortgage calculators that are adapted to specific questions or needs of buyers. You can find home mortgage calculators specifically designed to calculate the values associated with the following specific questions that buyers may have:
- How much extra payment should I make each month to pay off my mortgage by a specific date (and how much interest will I save)?
- How much interest will I save paying my mortgage biweekly instead of monthly? How much more can I save if add an extra payment?
- What is my mortgage balance given the number of payments I’ve already made (or still need to make)?
- How long will it take to break-even on my refinancing costs, and what will be my total interest savings?
Furthermore, this website also has specific calculators to help potential buyers understand how their current rent payments could be used to pay a mortgage and thus start building equity.
A “rent vs. buy” calculator can help future homeowners understand the financial benefits of responsibly purchasing a home.
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Banks That Offer Home Loan Calculators
A number of bigger banks that have their own websites also have home loan calculators or home equity loan calculators that you can use before deciding on signing a loan. These calculators can help potential buyers understand the specific information that the bank will offer.
It is always best to educate yourself first before stepping into a bank to begin negotiating a loan.
Discover Bank is one such bank that offers a helpful home loan calculator, saying:
“Use our home equity loan calculator to estimate what your monthly payment could be. Input how much you want to borrow, how much your home is worth, and your current mortgage balance and we’ll do the rest.”
Your regular or local bank may even offer a mortgage calculator on their website; try visiting their website or doing a quick web search. Otherwise, these banks also offer home mortgage calculators:
- USAA
- Regions
It is wise to compare home loan calculators offered by specific banks to independent home mortgage calculators offered by independent websites not affiliated with any specific bank.
How a Home Mortgage Calculator Can Help You Get Your Finances Under Control
Signing a mortgage shouldn’t be a scary death sentence. Rather, it should mark an important moment in life that helps you secure a promising financial future.
Through educating yourself with the help of a home loan calculator, you can make sure that you understand your investment and are prepared to make the most out of your new home.
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