Payment Calculators

Everyone feels happy when they find their dream house. That feeling of elation can quickly fade when the asking price quoted is beyond your immediate financial ability.

While some people turn to family to help them bride the gap between their capital assets and the value of the property, other would be house buyers are often forced to go to a bank or loan company to secure a loan for the amount that they need to purchase the property.

Although most banks and loan companies set roughly the same criteria in deciding whether to offer the home buyer a loan, or how much they area allowed to take out, all banks and loan companies have different interest rates and repayment plans.

Loan Criteria

In most cases a bank or loan company will look at the following criteria in order to assess the suitability of the individual for the loan that they are seeking:

Gross pre-tax Income Personal debts Credit history Amount of money being asked for Personal references

Depending on the above criteria the bank or loan company will decide whether or not to refuse a loan or grant the homebuyer the loan amount that they are seeking.

Once the criteria that the bank or Loan company have set, the company will make every effort to make clear all the details regarding the loan and what the repayment methods are.

When you are discussing the loan with the bank or loan manger you should always ask the following questions, or at least be told the answers to them, when taking out and loan:

What is the loan amount in dollars? What are the repayments per week/month/year? How many repayments there will be? When will the balance of the loan be paid off? What are the options for repaying the full amount earlier? What is the interest on the loan? What are the consequences of missing a loan repayment?

While during the meeting the banks manager will explain the details of all of the above questions, it is important that you constantly be aware of the following most important details, throughout the repayment period of the loan that you are taking out:

The loan amount

The repayments per week/month/year

How many repayments

The balance of the loan at each payment period

The interest being paid on the loan

While some people prefer to manually keep account of all of the details, technology is available to help out those of us who are either too busy, too unorganized or who just pain hate math!

Payment calculators are available that do all the calculations that you could need to keep in touch with how much money you are paying each month, as well as when the balance of the loan will be paid of.

There are in effect two types of payment calculators:

Payment calculator type 1 Payment calculator type 2

Each of the above has a specific use, outlined below

Payment calculator 1

This is primarily a mortgage calculator, as opposed to a straight loan repayment calculator. Mortgages differ from loans in that with a mortgage you are loan money by a lender and use the house as a form of security, whilst you repay the amount you have been loaned, over a set period of time. If you do not pay the debt as agreed, i.e. you default on the payments the lender can then sell f your property to pay off your debt.

The payment calculator type1 works in the following way:

Enter the number of monthly payments into the calculator Enter the interest rate of the mortgage into the calculator Enter the amount of loan into the calculator Press enter

The calculator then calculates the amount of money in dollars in monthly payments that you will need to make to pay off the mortgage, over the period of payments that you have set.

For example:

If you have a $50,000 mortgage over a 30 year period the number of payments will be 30 years x 12 months = 360 payments.

With a standard interest rate of 8% the monthly payments will therefore be $367 per month.

Payment calculator 2

This payment calculator calculates simple loan repayments and would be sued where you have taken a loan to cover the gap between your capital and the valuation of the property that you are buying.

Generally loan payments are less than mortgage and the type two calculate reflects this fact.

As in the first calculator, the following are used to calculate the monthly loan repayment amount:

Gross pre-tax Income Interest rate of loan Number of years loan is to be repaid over