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Article Directory :: Finance & Investment Articles
Everybody wants to know about a mortgage home calculator.
What is a mortgage calculator? What does a mortgage loan calculator do? Why is a mortgage payment calculator different from a common calculator? How does a mortgage home calculator work? Who benefits from a mortgage amortization calculator?
Keep reading. At the conclusion of this article I am going to reveal a secret that could save you more than $100,000.
Here are the basics to consider.
In its simplest terms a mortgage is simply a loan secured by real estate. When the loan is paid off the mortgage is removed, freeing the property from debt.
A home mortgage loan to buy or refinance a house incurs interest, charged by the lender. Usually this interest is expressed as a percent such a 5% per year (annually).
Mortgage interest can be paid many different ways such as interest only payments in which the borrower pays only the interest but reduces none of the principal until a later date. Principal means the face amount of the mortgage loan or the amount left owing.
Most home mortgage loans in the United States are amortized. That is why many borrowers are frustrated when they try to figure monthly house payments with a common calculator.
Amortization is simply a way of reducing a mortgage debt through monthly payments of principal and interest. That's why a mortgage home calculator should actually be called an amortization calculator.
A mortgage amortization calculator can tell you what your monthly payment will be if you know three things.
First you must know the term of the loan. Term refers to the period of time required to pay off the loan, for example 30 years, 15 years, or 40 years.
Second you must know the annual interest rate required to borrow on your mortgage. This is sometimes called the nominal rate (named rate) and is the not the same as APR (annual percentage rate).
Third you must know the principal or in plain language the amount of money you want to borrow.
If you know these three things you can solve for PI. "P" stands for principal and "I" stands for interest. PI is normally expressed as a monthly mortgage payment of principal and interest.
As long as you have at least 3 out of 4 factors (term, interest rate, principal, payment) you can solve for the remaining factor.
Some online mortgage home calculators allow you to also view and even print out an amortization schedule. An amortization schedule is simply a spread sheet showing monthly and/or annual payments. You can even see how much interest is being paid each month and the amount of principal you are paying down.
Do you remember I have a little secret for you? Here it is!
When you make your mortgage payment, it isn't divided up equally between principal and interest. In the beginning of the mortgage term, a home owner pays far more in interest. Very little of the original loan amount is reduced.
That is why borrowers feel disappointed when they look at their statements in the early years of the loan. But there is a way to use amortization to your advantage.
By simply paying a few more dollars toward principal each month in addition to the normal principal and interest payment, you can dramatically decrease the balance on your mortgage. This process can knock years or even decades off the term of your loan.
What you get in return can often mean an interest savings of hundreds of thousands of dollars.
Kate Ford of Get-Your-Best-Mortgage-Rate.com agrees with you about mortgage financing. It's become too complicated. Contact Kate is your opportunity to ask Kate, a mortgage insider, for down to earth answers in real-time. After all, every question is a good question. Ask Kate today!
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