How to Use a Home Equity Loan Calculator
The lower your home's interest rate, the lower your monthly payments will be. However, even though your monthly payments may be the same each month, the amount that you apply to your loan's principal will vary each month. Therefore, some math is needed in order to determine just how much equity you are actually gaining. Thankfully, a home equity loan calculator can help you to determine how much money you can borrow. There are many free online calculators that you can use.
What a Home Equity Loan Calculator is
A home equity loan calculator is a mathematical program that will ask you for some important information. From there it will calculate how much money you can borrow. It will also show you what your amortization schedule will look like. This program is similar to what your lender may use.
The information that the home equity loan calculator will ask you for includes the value of your home. Of course, the more accurate your figures, the more likely you will get accurate results. Since most appraisal companies will take private orders, you can order an appraisal at any time before obtaining a loan. This will usually cost you a few hundred dollars.
Another thing that you will be asked is for the amount that is owed on your current mortgage. Make sure to include both first and second mortgages. Your mortgage lender can give you the exact amount owed at the present time. These figures will be used to determine how much equity you have in your home.
Once you enter these figures into the home equity loan calculator you will receive a graphical representation of your results. This will outline the amount that you could borrow at 80%, 90%, 100% and 125% as well as your estimated monthly payment.
You may also get a sample of your amortization schedule, so you can see how much of your monthly payment will go towards your principal. The graph will also show you how much you could borrow if the value of your home was more or less than your appraised value, which can be useful if you are using a ballpark figure or plan to make some home improvements soon.
Now you can see why you need to research your options. Using a home equity loan calculator is a great way to compare and contrast different loan products and determine how much you will have to pay each month.
