Home values have fallen by 30 percent, 40 percent or more in many parts of the country. Such low prices may be tempting you to take the plunge and buy a new home. But is that a wise choice for you? A home loan calculator can help you find out.
It’s important to know exactly what you’re getting yourself into before you make an offer on a new house, townhouse or condo. A home loan calculator, also called a mortgage calculator, can help you determine your monthly mortgage payments in advance, so you don’t become “house poor,” or worse — run the risk of foreclosure.
When you plug some basic information, such as the mortgage amount, mortgage term, interest rate and mortgage start date, into a home loan calculator, you will get an estimate of how much a particular home will cost each month. In turn, you will be able to determine whether or not you can afford the monthly payments. A home loan calculator even allows you to see how adding extra payments can affect your loan.
A house is likely one of the biggest investments you will ever make. In addition to using a home loan calculator to make sure you aren’t overextending yourself on your mortgage, make sure you have enough money set aside for your:
- Down payment
- Closing costs
- Maintenance fees
- Repair costs
- Association fees
- Property taxes
You should also consider factors such as how long you plan to live in the home and the home’s prospect for appreciation. If you don’t plan to stick around for a while, you might be better off renting. It can take several years before you recoup your initial investment and net a profit from the sale of your home.