Mortgage Calculators

Mortgage calculators are stand alone soft wares or a web based tools which helps current or potential borrowers to determine their borrowing power while purchasing a real estate entity. It is used to compare several loans on various mortgage specific parameters like interest rates, principal amount, duration of mortgage, frequency of payments etc. This comparison helps the user make a well informed choice when he/she shops around for a Mortgage.

Mortgage calculators enable the user to change a few parameters and see the implication it has on the Mortgage arrangement. Prior to the existence of such automated calculators people who wished to analyze the implication of changing variables on a mortgage had to depend upon compound interest rate tables. Understanding these interest tables required a working knowledge of compound interest calculation which was not possible for everyone. The use of Mortgage calculators eliminates the need of understanding the compound interest calculations as it does the entire math internally and provides the answers within a matter of seconds. Using such a tool even a layman is able to analyze and compare various different mortgages. A simple example of a mortgage calculator is as follows:

Principal amount: $100000, Annual Interest Rate: 10%, Duration of Loan: 10 years

What will be the monthly payments?

The Mortgage calculator will give an answer of $1321.51

Today’s calculators allow you to enter more advanced parameters like annual property tax, annual property insurance costs and analyze how it affects the monthly payments. What makes these calculators even more useful is that it allows the users to do the above analysis on a number of different loans.

A lender will typically use such a calculator to compare your monthly income and monthly debt amount. The mortgage calculator can help a user consolidate all his income sources and compare this to the monthly debt load he bears. The lender will use this information to calculate the total debt payments to be made and determine how much percent are the debt payments of your monthly income. This figure is used by the lender to determine whether a borrower can get the loan or not.