This article will discuss how to use a Borrowing Power Calculator and then give you one of my ways to save money.
Calculate how much money you can borrow based on your financial circumstances with a Borrowing Power. First, enter the income after tax of the person or married couple. Add up expenses of all parties involved so that the mortgage calculator tells you everything you need to know. I like adding in the monthly payment safety buffer so that you make sure you don't get in over your head. You will be much happier with an extra 200 dollars at the end of the month than living check to check. You could even put it into your monthly mortgage payment as a Way to Save Money!
One of my Ways to Save Money
The loan term is actually a big deal. Usually people go straight for 30 years to see the maximum they can afford. This is a bad way to look at it. If you're planning to only live somewhere for 3 years and you get a 30 year mortgage then your first 6 monthly mortgage payments on an amortization schedule would look something like this:
$200,000 30 yrs 6% interest rate - Monthly Mortgage Payment $1,199.10
You will have saved $8,000.00 in those 3 years which is pretty good right? Well of course it is, but it can be much better! Imagine now that you lowered what you want to spend and looked in the range of $170,000.00.
$170,000.00 20 yrs 6% interest rate - monthly mortgage payment $1,217.93.
Only about $18.00 more per month than the last example but for only 20 yrs this time!
This time you saved $15,000.00! You saved almost double by spending the same amount of money! Also, if you happen to stay a bit longer than you ant icipated than that principal is going to go down quick! The cheaper it is, the quicker is sells also, so when it comes time to actually sell it will turnover quicker. What a great way to save money!
I hope you go for the cheaper mortgage loan, you will be very happy after those 3 quick years go by and you have some extra cash coming to you. A Borrowing Power gives you a lot of information about you mortgage loan. Put the numbers above into a mortgage calculator with an amortization schedule and you'll see that you'll save over $109,000 over the course of the entire mortgage loan! Can you believe that? AND you'll have been done paying after 20 years instead of 30 years and relieved yourself the stress of a mortgage payment each month!
The main point here is that a mortgage is a huge investment and sometimes people put very little work into buying and understanding a mortgage. Do the research before hand and youll be very happy that you did. Youll save a lot of money and be very happy that you did it!
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