Home Purchase Calculators and the Financial Decision

In addition to helping the prospective purchaser better focus their real estate search focus by zeroing in on how much they can afford and by helping make the buy-versus-rent decision, mortgage calculators also help quantify for prospective purchasers any potential tax benefits that might accrue to them as a result of their purchase. Furthermore, they calculate the loan’s Annual Percentage Rate (APR) and loan payment for an ARM should the purchaser choose that specific mortgage option.

Using easy fill-in-the-blank technology, the prospective owner can estimate the tax impact of a potential purchase by simply filling in the a few key items of information such as the loan amount and duration, interest rate, month of purchase, estimated Schedule A Deductions, et cetera.

The mortgage calculator will then compare these deductions to the prospective purchasers’ standard deductions in order to calculate impact on taxes of purchasing this home. The calculation is an estimate for planning and comparison purposes. The actual tax impact is confirmed when the purchaser fully completes their yearly income taxes forms.

The Annual Percentage Rate (APR), by definition, is a figure which takes into account the relationship of all of the various finance charges associated with a loan. It is very valuable in comparing various loan options. Still, APR is calculated different ways by different companies.

The loan fees that may be included in the calculation range from appraisal fees to wire transfer fees with many other, such as “administrative costs” are also sometimes added into the mix. The mortgage calculator helps to ensure that prospective purchasers are comparing apples with apples when assessing their various loan options.

An Adjustable Rate Mortgage (ARM) is one with an interest rate that fluctuates – usually based on a cost-of-funds index from a bank or savings and loan. ARMs can be deceptively attractive, or needlessly intimidating, based on their inherently fluctuating nature.

Prospective home purchasers may find that using the mortgage calculator to calculate initial payments, as well as, compare ARM options, helps them to feel a somewhat more empowered in making their financing decision. The mortgage calculator figures the initial payment and estimates future payments.