-takes the mystery out mortgages
How much mortgage can I qualify for?
It is a first question that comes to mind of real estate buyer, be it the first time home buyer or a seasoned real estate investor.
At A Glance: Mortgage Calculators
In the era gone by, answer to such a question involved complicated calculations and the process was time consuming. It involved the use of complicated compound interest tables and good understanding of the mathematics. This was beyond the ability of a regular home buyer who just wanted to know the answer to his ability to afford the purchase and how it would affect him financially.
How mortgage calculators are useful?
Fast forward to the world of computers and financial / mortgage calculators and the answer to such a question can be had with a few keystrokes. Mortgage calculator is a very useful financial tool that can tell how much an individual can borrow for his real estate purchase. Mortgage calculator can also help to compare the costs, interest rates, payment schedules and effect of prepayment to the monthly payments and the total cost of the mortgage.
What a mortgage calculator does?
In a mortgage, the prime variables are, Principal amount that is being borrowed, interest rate on the borrowed money, compounding period, frequency of mortgage payments and the amortization period (the time period in years/months, over which if all payments are regularly made, the total borrowed amount is fully paid). In a simple scenario, if one knows, the four factors, the answer to the fifth can be easily had from mortgage calculator.
There are hand held mortgage calculators and web based mortgage calculators. Almost all financial institutions that are in the mortgage business provide access to such a calculator on their website.
To know how much mortgage one can qualify for, simple answers to questions such as:
- Gross Monthly income of the borrower / borrowers, monthly payments on current outstanding debt, property taxes, monthly heating costs, (monthly condominium fees, if the purchase is a condominium) down payment on the property, are needed. Once these are entered in the mortgage calculator, the calculator easily tells the maximum amount of mortgage that one can qualify for. One example of such a calculator is available on the site: Flat Fee Canada.
- In scenarios, where you want to borrow more than what is allowed under the bank act (called a high ratio mortgage which is greater than the conventional mortgage in Canada), a mortgage insurance premium must be paid. Current Canadian mortgage calculators can also calculate such premiums, a sample of such a calculator is available at: Mortgage Premium Calculator
- Financial institutions engaged in lending money for mortgages have their own in-house limits on lending money. For example, most mortgage companies will give a mortgage on vacant land up to 75% of the value while for a house they will lend up to 95% of the purchase price when the mortgage amount is insured. For such in house guidelines, one will need to contact the specific institutions engaged in mortgage business.
These calculators can also answer questions such as, how much income is needed to qualify for a certain amount of mortgage, effect of higher monthly payments on the total interest costs, savings in interest costs, when a lump sum payment is made during the term of the mortgage, increase in the mortgage approval amount, if the down payment is increased, tax benefits of home purchase in those jurisdictions where there are tax incentives to home buyers, whether one should refinance or not, pros- and cons of interest only payments rather than blended monthly/periodic payments, savings when switching from monthly payment to weekly or bi-weekly payments and so on.
Mortgage Calculator is, indeed, a very useful tool to get easy answers to complicated mortgage questions; its use can save a lot of money to a real estate buyer.