Principal Repayment Calculator
The housing market is an unstable element. Each year the price of a property will either rise, normally well above inflation, or crumble, leaving house prices at a fraction of the value that they had been.
Timing is everything with the housing market. Pick the right time and you get a bargain, pick the wrong time to buy and you get stuck with an overpriced house. Regardless of the cost of the house, unless you have a large amount of capital you will either have to take out a loan or a mortgage to cover the cost of the property.
What ever the amount of loan that you take out you will eventually have to pay it all back, plus the interest that the bank or loan company will charge you for the loan.
Before buying the property you should find out as much information about the loan, or mortgage, as possible. Some of the most important items that you may wish to find out about are highlighted below:
How much is the loan amount is worth before interest and other items
How much you will be paying per week/month/year in repayments
How many repayments there will be in total
At what time will the balance of the loan will be paid off in full
What are all the options available to you for repaying the full amount of the loan earlier than the agreed date
How much is the interest on the loan What are the consequences of defaulting on a loan repayment
How Much Money You Will Need
Understanding the responses to the above questions will help you examine the loan as a whole, so that you can consider all the pros and cons.
Once you have worked out how much money you need you will have to decide if you want a straight loan or if you want to take out a mortgage. Both have their pros and cons, but are very different. In short a loan is for a small amount of money; if you only have a small difference between the capital you have and the value of the property you are buying. A mortgage is for a larger amount of cash and is usually paid off over 15 to 30 years.
Sitting down with a financial planner will be the best way to decide what type of financing will best suit you. Banks and Loan companies offer various type and amounts of loans, however you should find out if you pre-qualify for a loan by using a qualifying calculator. These will tell you how much you need to earn a year to be accepted for that loan amount. A positive result will not necessarily mean that a bank or loan company manager will accept you for a loan as they make a judgment on a multiple number of items; most of which are listed below:
Your gross pre-tax Income
Any personal debts or liabilities that you may have against you
Your general credit history
The amount of loan that is being asked for
What your personal references are like
Understanding what the repayments in theory are and when they are due each month (or earlier) is only one of the most fundamental aspect of accepting the responsibility that comes with paying off a loan or mortgage.
If you choose to take out a mortgage then the need to keep abreast of you're your repayments are takes on a more important form as unlike with taking out a loan, your mortgage will be secured again the value of your property. The consequence of this security means that if you fail to keep up with the repayments then the underwriting bank or loan companies has the right to reposses your home and sell it.
Repaying A Mortgage
When repaying a mortgage you should have the means to calculate information that will be vital to you, such as how much the repayments will be and when the loan will be paid off; at any point during the lifetime of the loan. Knowing this information will help you understand where you stand with the loan:
You should also be able to calculate how increasing your repayments will affect the following:
How long it will take to pay off your loan
What the repayments are per month
There are various types of loan calculators that can allow you to calculate all aspects of loan repayments, as well as the opportunity to keep track of the payments and how certain aspects can affect them.
Loan calculators can calculate pretty much everything that you could want to know about your existing loan, or about a loan that you are interested in taking out. Using a loan calculator is extremely easy.
Using A Principal Repayment Calculator
One calculator that is really useful is the principle repayment calculator. The principal repayment calculator is a mortgage calculator that tells you when your normal mortgage payoff would be and when the payoff would be if you paid a specific extra amount each month, above what you should pay.
The principal repayment calculator calculates the amortization of the loan: the gradual elimination of the liability on the mortgage, in regular payments over a specified period of time. These payments that are calculated are sufficient to cover both principal and interest.
To use the principal repayment calculator you must know the following, which you will need to put into the calculator
Principal Loan Balance: how much the loan is worth before the interest Annual Interest Rate: what the interest rate is in a percentage Amortization Length: the number of years for repayment
The calculator can then calculate the repayments that you will pay each month. Whilst this is common for a loan calculator, what sets the principal repayment calculator apart from others is its ability to calculate how much you would need to pay if you want to pay off the loan earlier.
To discover how much you will need to pay the loan off earlier you will need to input the following into the calculator
Additional Monthly Prepayment: How much extra you want to pay per month Increase Monthly Payment each year: how much the monthly payments should increase in a percentage each year, to pay the loan off earlier.
From these variables the monthly Principle interest payment is calculated and how many years the loan would be paid off in.
For example, consider the following
If you want to pay off a $100,000 loan earlier than the 30 year period time you originally set, and are willing to pay an extra $150 dollars a month; with an increase of 5% per year in payments then for the following information
Principal Loan Balance = $100,000 Annual Interest Rate = 8.5 % Amortization Length = 30 years Additional Monthly Prepayment = $150 Increase Monthly Payment each year = 5%
The calculator will calculate that the loan will be paid off in just under 12 years, as opposed to the 30 that was initially set.