A mortgage calculator is an automated application, embedded either on financial handheld calculators or various websites on the internet, that help a possible real estate property owner to establish if they can afford to take out a loan to buy a piece of real estate property.
They are engaged to validate the financial implications of changes in one or more variables such as loan principle balance, interest rates, number of payments per year or the regular payment amount, in a financing agreement. Typically speaking, a mortgage is a secured loan that is acquired by a real estate buyer to facilitate the acquisition of a house or a piece or real estate.
The loan is secured by the piece of property being purchased and as a requirement; the borrower has to sign an agreement with the lender to this effect. The agreement terminates when the borrower fulfills his obligations owing to the lender or when the property is foreclosed by the lender. Few individuals have the financial backing to allow them to buy property outright. Many potential home buyers therefore apply for financing to enable them put a deposit on the home or buy it completely.
Because of the high cost involved in buying a home, new buyers will opt to finance a percentage of the purchase price. Prior to the introduction of the mortgage calculator, most buyers were forced to use compound interest rate tables which required a working understanding of compound interest calculations for mortgage comparison. Now everybody can access information as to the financial implication of this loan with no prior knowledge in a specific area using it.
The calculator can also be used to determine how much property you can afford by factoring in your total monthly income and total monthly debt load. By computing these figures, it is possible to determine your financial capacity to own a particular piece of property. It can also test different amounts of loans with different interest rates giving you a comprehensive loan comparison so that you can make an informed choice on the best loan for you to take out.
By using the calculator, a borrower will understand more than just the monthly installments that will be due but also other fees that come embedded with mortgages. Moreover, the application offers buyers loan comparison avenues so that when they take out a mortgage, financing it will be a problem.
In the recent times, the calculators have been upgraded. This is especially after the 2007 housing bubble burst in the US. Studies revealed that many of the borrowers had taken out bad ‘loans’ which they would not be able to finance leading to foreclosure on their homes.
The mortgage calculator was introduced and it can be used to calculate financial implication of adjustable rate mortgages which can give an average figure and risk based on the all the possibilities calculated. This type of loan calculator can be applied with the various derivatives that sprout up in the real estate market as it has the capability to analyze data exponentially.