Simple mortgage calculators
can be found all over the internet,
often on the websites of lenders or of brokers, offering a 30-second
calculation of just how expensive a house you can afford. The simplest
of calculators has three options: the amount one wishes to borrow, the
interest rate at which they intend to pay back the loan and the
amortization rate, or the planned amount of time the loan will take to
be paid off. There are many far more complicated mortgage calculators,
which do things such as calculate reverse
mortgages or required
payments, but for now the accuracy of the simplest type is to
be judged.
After testing numerous simple mortgage calculators with only the three
aforementioned options and comparing them to the actual loan amount one
could expect to receive, it has been discovered that simple mortgage
calculators often give a very inaccurate portrayal of what one may be
allowed to borrow. They do not take many factors into account such as
car payments, credit card limits and any other debts to which the
potential owner may be attached. The vast majority of potential
homeowners have at least one credit card or other form of debt. This
automatically skews the calculation results, as banks will take into
consideration anything which may potentially prevent one from repaying
back their loans and ensure they get their investment back along with
interest.
In conclusion, while a simple, quick and easy guide giving a general
indication of what one could borrow should they choose to buy a home,
simple mortgage calculators should not be used as an accurate, perfect
example as what one should be able to afford. The reality is
that simple mortgage calculators are not complex enough to
give a
near-perfect indication of borrowing power and most people will not be
able to borrow as much as is presented by these calculations.
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