A good way to figure out how much your loan is going to cost you is to use an amortisation calculator. This is a simple calculation that the average person probably wouldn't be able to figure out on their own. A calculator can tell you what you need to know. The calculator will tell you a lot of different things. It will give you the amount of your monthly payment. It will tell you how much of that payment goes to interest and how much goes to the loan's principal. And it will tell you how much you will spend on your mortgage all together.
What's that?
An amortisation calculator lets you put in a few simple pieces of information, and then it tells you exactly what those pieces are.
Type in how much the mortgage will be. This is the cost of the loan, or mortgage. It is not the price of the house.
- Type in the interest rate that will be on the mortgage. When you do this, it's best if you can quote your own interest rate as accurately as you can.
- Type in the loan's length of time. This is how long it will take you to get rid of the debt.
The amortisation schedule comes out, along with a lot of information. You will learn how much you will have to pay back for that loan. You don't have to give the calculator any personal information because it only needs these few things to give you information.
You can use the calculator to figure out how much you will pay each month for your mortgage. But you can then use this to help you figure out what kind of loan is best for you. One example is the loan's terms. Even though you might think it's best to take as long as possible to pay back the loan, use the amortisation calculator to find out how much more interest a 30 year loan will cost you than a 25 or 20 year loan. If the difference is big, it might be smarter to choose the shorter terms that cost a little more per month.
This can also help you figure out how much you can spend on a house. For instance, if you can only pay $800 per month, you can use the amortisation calculator and the current interest rate to figure out how much the home you buy can cost. Do this before you go out to look for a place to live.
As you can see, this simple tool can help you in a lot of different ways. You can use it as soon as you start looking for a home, which will put you ahead of the game. If you don't, you might end up paying more or, even worse, you might not realise how much you are paying for your mortgage when you add in interest and the length of the loan. Use a calculator to figure it out right away.
