Owning a home and paying a mortgage is very different from renting, and many first-time buyers underestimate the hidden costs of homeownership like interest, property taxes, mortgage insurance, homeowner’s insurance, and maintenance. Before you buy a home, it can help to use a mortgage loan calculator to give you a better idea of exactly what you can afford. You can even use loan calculators to help you save thousands in interest over the life of your loan by optimizing your payments. Here are a few loan calculators that can help you during the home-buying process.
Rent or Buy?
A rent vs buy calculator can help you determine if you can really afford to buy a home or if you’re better off renting. This type of calculator goes beyond merely comparing a monthly rent payment to a mortgage payment. By plugging in information like your target monthly rent, home price, how long you would remain in the home, your income tax rate, and the mortgage rate you would likely receive, the calculator will help you compare the true cost of renting versus buying over a period of years. This calculator will consider factors like expected home improvement and maintenance costs, home appreciation, and long-term capital gains tax to help you make an informed decision.
How Much Can You Afford?
Do you know how much you can really afford to borrow? Don’t let the bank tell you what you can afford, as your preapproved loan amount may put a strain on your finances and make you house-poor. A mortgage loan calculator will estimate your monthly payment on a loan based on your loan amount, down payment, and interest rate. You can use the calculator to see how much a lower interest rate will save you monthly and over years. If the difference is big, you may decide to work on your credit for a few months before buying. You can also see how putting more money down will affect your mortgage payment or what you will pay by lowering or raising your target home price.
How Much Can You Save?
While most people who buy a home for sale in Irvine opt for the standard 30-year fixed-rate mortgage, it is not necessarily the best option in your situation. An amortization calculator can show you the full loan payment schedule to see how much you will pay in interest over the life of your loan. Interest charges can easily add tens of thousands to the purchase price over 30 years. If you trade in a lower interest rate for a shorter loan term, you can dramatically slash your interest charges. Finally, loan calculators can help you save money even after your loan closes. You can use loan payoff calculators to see how adding even a small amount to your principal each month can reduce the length of your loan and interest charges. You may even want to switch to biweekly instead of monthly payments. A biweekly mortgage calculator can show you how changing the way you pay your mortgage pays off in the long run. Because there are 52 weeks in a year and 12 months, paying biweekly means you end up making 26 half-payments, or the equivalent of an entire month’s extra payment, each year. This can shave 6 years off a 30-year loan. For more guidance through the home-buying process, reach out to the trusted real estate agents at Irvine Residential Living. We can show you houses for sale in Irvine and walk you through every step of the way. Give us a call today at (714) 454-6304.