When you buy a home, the most important thing to consider is the financing. Without financing, most people cannot afford to own their own home, and the terms of a home loan can vary a great deal. There are things like APR and length of terms that will determine the total finance charges. If you are interested in knowing how to find how much interest you pay on your mortgage loan, here is information that may be helpful.
When you wish to know what the total finance charges of a loan will be, a mortgage loan calculator is a handy tool to have. It is not hard to find one of these tools, as they are available at many lenders’ websites. You also can go to a major search engine and search for “home loan calculator”. This will provide you with several options.
When you are at the loan calculator it will ask for the amount of your home loan. Do not place the purchase price in the calculator. Put in the amount of money that the lender is loaning you to buy a home. When only looking for estimates, you can simply estimate the amount that you are thinking about financing.
The next important step is entering the APR or annual percentage rate, also known as the interest. If you have your mortgage papers with you, enter the APR listed. However, if you are looking for an estimate, check out current annual percentage rates at several online lenders. This will give you a good idea of what to enter.
The third step is entering the loan terms. Most loans these days are for thirty years, and that is what you will most likely be entering. After you enter this information you will hit an “enter” or “calculate” button. This will provide you with an amortization schedule.
An amortization schedule provides you with a breakdown of all 360 of the home loan payments. You will notice that the first few years contain very little principal. This is because a huge percentage of each payment goes toward interest in the early years of the loan. As you look through the amortization schedule, you will see that the interest starts to drop and the principal goes up, as the years go by.
The amortization for the home loan will provide you with the total finance charges of the loan. You may be surprised to see that your total charges are as much or more than the total amount that you have borrowed. This is how lenders make their money. You may only be paying 5 percent interest per year, but in thirty years you have paid one hundred percent or more of the loan principal in finance charges.
Another type of loan to consider is the ARM or adjustable rate mortgage. This is a little harder to figure interest, as the rates can change over the life of the loan. The best thing to do is figure it as a fixed rate loan, and guess about any changes in the future.
If you are looking into an ARM loan, make sure to look into the terms. Some loans will provide low interest with no rate hikes for a specified amount of years, like five years. Also, some loans have caps that prevent the APR from being adjusted too high.
ARM loans can be a good idea if you do not plan to keep a home too many years. If you sell before any mortgage rate hikes can go into effect, you can do well. However, these loans should only be taken out after much study and consideration, as they can be trouble.
When checking out how to find how much interest you pay on your mortgage, you can compare lenders and loans. This will tell you how to find how much interest you pay on your mortgage. If you are interested in saving money on finance charges, there are several strategies that you may employ. One of the best strategies for saving money on home loans is shorter terms. Go to the home loan calculator and use the same numbers as before. Instead of putting “30 years” in, place “15 years” in the loan term category. You will notice two major differences with the fifteen year home loan.
When you look into how to find how much interest you pay on your mortgage, a 15 year mortgage monthly payment is higher. If you can afford to pay this higher payment, you will be much better off. For one thing, the house is paid for in half the time. This saves a great deal of money. Also, your finance charges will be much less than the 30 year loan. The savings with a 15 year loan can be substantial, if you can afford it.
You can save a lot of money on finance charges if you have a 30 year loan. All you need to do is make an extra principal payment each month. In the early years, when you pay an extra amount equal to the current principal payment, it can save a great deal of money over the life of the loan. Naturally, the more that you pay on the principal each month, the more you save.
Another advantage of paying extra principal each month is home equity. You are increasing your home equity every month that you make extra principal payments. This can be an important feature, when you need to refinance or take out a second mortgage in the future. The more equity you have the more you can borrow, and it will be easier to be approved for a loan.
When you want to know how to find how much interest you pay on your mortgage, use an online home loan calculator. You can change any of the amounts in the calculator to see what you would pay under many different circumstances. It will also tell you what your payment will be for the life of the loan. Remember that shorter term loans save a lot of money on finance charges and ARM loans are to be carefully considered before taking them out.