Nobel Finance Sydney – Money Matters Newsfeed

By Leslie Collins

Are you renting a house or apartment because you don’t think you can afford to own your own home?

Many people who might be in a situation to buy instead of rent simply don’t know their options and therefore never realize the benefit of home ownership.

The first step is finding a good online free mortgage calculator that analyzes your specific financial situation. The basic types of mortgage calculators needed are: straight amortization, points comparison, 15-30 comparison, debt-to-income and pre-qualify amount. Look for ease of use and simple reporting in easy to understand terms. Let’s look at a few.

Most straight amortization mortgage calculators require that you input 3 simple variables: amount you want to borrow, interest rate and length of loan, usually in years. For example, say you are interested in borrowing $150,000 at an interest rate of 6% over 30 years.

The basic online amortization mortgage calculator simply takes the data and returns the payment schedule, in this case:

Your total monthly payment will be: $899.00 for 30 years, which is based on a loan amount of $150,000 at an interest rate of 6%. Your total payments for this loan term are, $323,640. The total cost of the interest payments for this loan term are $173,640.

A good free online mortgage calculator will, as you see provide more than just the monthly payment; it lets you know the total interest paid over the life of the loan.

Perhaps the most useful mortgage calculator analyzes debt-to-income. Let’s look at this calculator.

The debt-to-income calculator is extremely useful because it helps you understand how much money lenders will let you borrow.

First you enter your gross annual Income: salary plus bonus, interest/dividends, child support etc…

Next enter all your debt obligations, which is comprised of proposed annual taxes, annual homeowners insurance . Also included in your debt are monthly credit card payments, car loans, any monthly medical or tuition bills etc.. don’t worry about exact tax and insurance cost at this point – just something close. You can always research a specific area for average property tax.

Lastly you enter the interest rate you think is reasonable as well as the loan length, for example 30 years.

Here’s a hypothetical situation

Your Income: Gross annual income (salary plus bonus, interest/dividends, child support ):$45,000

Your Expenses:

Annual taxes :$2500

Homeowners insurance: $500

All other debts (credit card payments, car loans, any monthly medical or tuition bills):$500

Loan Terms:
Interest rate: 6%
Term:30 years

Based on all these factors your maximum loan amount will be $125,093 or $750 monthly.

Varying the inputs really changes things – Say you have stellar credit and the lender drops your interest rate by .5 of a point because you have very little debt… no credit card payments or a car payment – only a measly $100 medical payment.

This increases the loan amount available to you to $202,540 or $1,150 a month!

Amazing what lower debt can do to your buying power!

The key is to experiment with the mortgage calculator - you may not qualify right this minute but it can show you what you need to do to achieve your goal of owning a home, reduce debt, increase your income etc.. – it’s probably a much closer a goal than you think. Knowledge is the key, you will get there!

Below is an excellent website with all the online mortgage calculators you need, easy to use and free – plus resources if you need to visit online lenders that will give you real quotes in minutes. Good luck!