mortgage fees calculator
Renting vs. Buying using a Mortgage Interest Calculator
You can use a Mortgage Calculator to figure out your Borrowing Power with the bank and they’ll tell you exactly what you can afford. The bank uses a formula that you might have heard of called your debt to income ratio. They basically take all you bills and match them to your income to come up with a percentage of how much you spend and how much more you can afford. This is good to know whether you want to rent or buy because it tells you how much you can afford for a monthly payment. Renting and buying are fairly close when it comes to the size of your monthly payment. The difference is the down payment, harder credit check and real estate fees when you sell. Renting is definitely a little cheaper, easier, and quicker in most cases so if you need something right away and you know it’s going to be short term then renting is for you.
There’s a couple of key points to figure out that will help you realize whether you should be renting or buying. First, how long are you going to be there? If you say anything less than 3 years you probably shouldn’t buy. Either that or plan on keeping it and renting it to someone else. You can have a management company do it for you if you need. They only charge about 10% of the rent each month. The only differences between buying and renting is Principal and Appreciation. The appreciation is similar to gambling in the stock market because they’re both good for long term as history has shown. Buying and selling for the short term may work, and there may be skill involved but you never know what might happen at any given time.
Principal is very easy to figure out by using a mortgage calculator that shows an amortization schedule. It shows you how much principal and interest are in each monthly payment. Notice that the principal is very low in the beginning because you still owe so much money. As you owe less you pay less interest which is why it’s so important to pay down principal. If you decide to buy, try to add a little bit to the principal each month so that you don’t have to pay as much interest.
Let’s assume you can rent for $1,000/mo or buy a $150,000 condo and pay $1,350/mo. The 1,300 includes:
Monthly Mortgage Payment – $850.00 Taxes/Insurance – $300.00 Condo Fee – $200.00
Everything there is basically the same as a rent payment, except you didn’t need a down payment or 2 months worth of work trying to buy the home in the first place. If you take a look at an amortization schedule you’ll see that the principal during the first year is about $165/mo. That’s your only savings compared to renting. So in this 3 year case you will have spend an extra $185/mo by buying instead of renting. In 3 years that equals $6,660.00 PLUS you would need to sell the condo with real estate fees and transfer of ownership fees.
However, buying in the long term is MUCH better. Extend that same circumstance out over 15 years and you’ll see a big difference for a few reasons. Look at the amortization schedule again and see that during the 12th year the principal is now $325.00, PLUS you bought the condo and no longer have to deal with inflation (as long as you get the fixed rate mortgage instead of the ARM Rate!). If you were renting over those 15 years your rent would have gone up close to 10% a year and you will have missed out on all that appreciation. Now take a look at how much you owe after those 15 years, $104,000! You already paid down $46,000 in principal and now the principal is much higher in each payment.
Everyone has a different situation and they always call for different avenues. There’s no best or worst idea, just simply make the best out of what you want or need to do. Also make good use out of the Mortgage Calculator because it can tell you a lot!
About the Author
A Mortgage Calculator can help you calculate your borrowing power with the bank. They’ll weigh your bills against your income to come up with your Debt to Income Ratio. I can show you how to do that formula to figure out if Renting or Buying renting or buying is the better option for you.
mortgage fees calculator Questions
Maintenance fees for a Coop/condo/townhouse???
Maintane fees are extra monthly fees on top of the mortgage?
What are these fees?
1) Can you estimate the monthly extra these fees will be?
2) On real estate website when you do the mortgage calculator why dont they include these fees on it. Cause maybe I can afford the mortgage but i hear that Maintance fees and stuff may add like $400.
Thanks…
Usually, while shopping for a condo, etc. there will be condo or maintenance fees discussed. This, of course, will be in addition to the PITI (principle, interest, taxes and insurance) you will be paying monthly. Sometimes the quote the monthly rate, sometimes it is given to you in yearly form and you have to divide by 12. This is a number decided by the Condo association as to the amount of monies needed by each member (owner) to pay for all the amenities and or maintenance which goes on yearly.
I would want to know what the condo fees cover. Mine cover my water, sewage, trash, building and parking lot maintenance and landscape fees. It also covers the property insurance for everything up to the inside of the actual condo, where my condo insurance picks up.
A good realtor should be able to tell you what the condo fees are going to be, if they have increased recently and are there plans to change what they cover or will those monthly costs be going up or down in the near future. When I moved into the condo in June 2006, my fees were $200.00/month, on January 1st, 2007, they dropped to $150.00/month. In my world, paying $50.00 less a month is like a raise.
I would also want to know about the reserves the condo association has for emergencies, contingencies and future improvements. Also, if the condo association is planning a large project, the condo fees you have been told may be due to increase.
Talk to your Realtor or real estate agent, they should be able to clear this up. During pre-qualification, these fees should have been entered into the equation. Sometimes, a person can qualify for everything, until they add the condo fees, which adjusts the income ratio standings, and makes them no longer look ‘good on paper’.
In the process of closing, the seller will have to give you copies of the most updated Condo docs that are available at this time ( you may have to pay a ‘copying fee’, or something to that nature). Some of these docs can be hundreds of pages long, other I’ve seen 15-20 pages. You will have a specified amount of time to look over these docs and see if you can ‘abide’ by the rules and regs laid out by the Condo association. If, for any reason you cannot accept the condo docs and all the rules and regs that apply to the property, you MAY (and I say MAY, depending on the Real Estate Laws of your area/state), be able to end the sales/buyers contract.
Please discuss all of this with your Realtor or real estate agent. They should get paid to keep you informed and keep informing you about the process at all steps along the way. If they are not doing this for you, demand that they do their job,,,or find another Realtor or real estate agent that will.
Realtors do this for a living, and understand the closing process. Most folks will get into a real estate transaction only a few times in their lives. A Realtor can have hundreds, if not thousands of transactions in their careers. Sometimes, Realtors can forget that a buyer or seller may not be informed as they are and make the assumption that the buyer or seller are better informed than they really are.
A good Realtor or real estate agent will keep you informed and be there to answer any and all questions. The more you know, the less buyer’s remorse, if any, you will have.
Best of luck and do not be afraid to ask questions. This is one of the largest purchases you will make in this life, you need to be well informed to make the right choices.
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