Connect with us


4 expert tips for getting the most out of online mortgage calculators





Photo: GotCredit/Flickr

Even casual home shoppers have likely come across an online mortgage calculator, which is perhaps the most misunderstood financial tool on the internet.

Based on cursory financial information inputted by the user, a mortgage calculator reveals approximately how much house that person can afford. Or, more specifically, how much money the user could reasonably borrow from a lender in order to purchase a home, complete with an estimate of the monthly mortgage payment.

And while the process may seem straightforward, it is often at this first (and crucial) step that first-time homebuyers will make a mistake.

Livabl recently sat down with Zack Tolmie, a home lending officer with Citibank, and Jodi Carter, a Certified Public Accountant working in New York City, to discuss how homebuyers can best use the data from an online mortgage calculator.

1. Find an interpreter

Numbers don’t lie, but they don’t necessarily tell the whole story, either.

“An online mortgage calculator may tell you that you can technically afford to buy a house valued at $300,000, but in reality, based on your larger financial picture, including debts and long-term financial goals, you really shouldn’t be buying anything over $250,000,” says Tolmie.

The estimate typically does not include other potential monthly and yearly costs associated with homeownership, like cable, internet, pool cleaning and landscaping. According to the listing site Zillow, these “hidden” costs can easily add up to almost $10,000 annually for the average homeowner.

A mortgage calculator gives a broad overview, at best, of how much house you can afford based on your data, but it often doesn’t consider some important variables that can drastically reduce your estimate.

“They don’t take into consideration the portion of the monthly payment for escrow, which may include property taxes and various forms of required insurance,” says Carter.

The temptation for some buyers is to bite off more home than they can realistically chew.

“The most common and damaging mistake that prospective homebuyers make is choosing a monthly commitment that is the highest amount they believe that they can afford. They don’t leave room for ongoing savings and they find themselves working just to pay the mortgage,” adds Carter.

2. Leave no room for error

One of the caveats of a mortgage calculator is that it is performing calculations based on user-provided data, which could be inaccurate or outdated.

For example, a shopper may think that they have a “good” credit score — which ranges from about 670 to 740 — when in actuality, their score hovers in the low-600s and technically “needs work.” The difference in credit score can drastically alter how much a shopper will get approved to borrow, which directly impacts their monthly mortgage payment.

According to the mortgage calculator on NerdWallet, a buyer in Atlanta, GA with “poor” credit and an annual salary of $90,000 may only get approved for a loan of about $386,000, compared to $417,000 for a buyer with a good credit score.

Free online tools like Credit Karma allow shoppers to see the same financial information as lenders.

“A lot of shoppers are unaware of mistakes on their credit report, and mistakes can cost thousands of dollars and time. Often, buyers will find mistakes when they make an offer, and then it’s too late to do anything to fix it,” says Tolmie.

Tolmie recommends having a financial expert review your credit report a year ahead of when you plan to buy.

“An expert can give you very specific details on how to improve your credit score, like just making all of your payments on time for twelve consecutive months. On-time payments are the biggest impact on a credit score,” says Tolmie

3. Manage your debts

According to a recent study, approximately 80 percent of adult Americans (across all generations) carry some amount of debt — whether it be student loans (Millennials) or credit card debt (Gen X and Baby Boomers).

Understanding the role debt plays in homebuying and actually knowing how much debt you carry can save you from a lot of headaches and heartaches down the line.

“The fact that you have debt doesn’t hurt your ability to get a mortgage, but what lenders are really focused on is how much your monthly payment on that debt is. We want to make certain you can afford that monthly payment as well as your monthly housing debts with your current income,” says Tolmie.

Mortgage calculator estimates rely on the accuracy of the user’s data. In reality, a shopper may have a monthly debt payment over $1,000 and mistakenly downgrade that payment. Or worse yet, fail to include an estimate for future payments because they don’t know how much they will amount to.

“With student loans especially, a bank will estimate conservatively, which could curtail your borrowing power,” says Tolmie.

4. Prepare a trial run

If the estimated payment feels too high to comfortably afford, it probably is. To find out how much of a monthly payment you can truly afford, start an aggressive savings plan.

“When preparing to buy a home, take the desired down payment amount and divide it by the expected monthly cost of your new home. That calculation will give you the number of months that you will need to save for the down payment,” says Carter.

Carter advises her clients to faithfully set aside money into a savings account for that duration.

In the end, this not only proves that you have the cash for the down payment, but that you can afford the monthly payments without struggle.


Source link

قالب وردپرس


New home? Prepare for the unexpected





(NC) Buying a house, getting married or having your first baby are all major life events that are likely to affect your finances. But whether you’re in the midst of a major life event or not, it’s important to check in on your finances regularly to maintain good financial health.

Your financial health encompasses things like your spending, savings, borrowing and future financial plans. It also means dedicating a set amount of savings for unexpected future events. It can even include optional credit protection insurance, such as TD protection plans, to help cover your debt balances in case of death, a covered critical illness or total disability.

Even though it can be tough to think about the unexpected, life is unpredictable and it’s important to plan for the unexpected. Find more information at

Continue Reading


Mortgage pitfalls to avoid





(NC) Throughout life, you may have moments where you’ll make a large purchase or invest in a costly item, like your family home. But whether you’re in the market for your first new property or already have a mortgage, leaving this asset unprotected can be costly.   

Insuring your housing financial debt, as well as debt for other big-ticket items like a new boat for your lakefront cottage or keepsake jewelry like an engagement ring, is a smart investment in your well-being.

To help protect your debt balances like a mortgage, your bank may have optional credit protection insurance products.

“Your home is one of your biggest assets, yet illness can happen at any stage of life. Worrying about your mortgage when the focus should be on health isn’t a situation anyone would wish for,” explains Shirley Malloy, vice president at TD. “Fortunately, we offer mortgage protection to provide coverage for your outstanding balance should you face a covered critical health event.”

Mortgage protection can be purchased whether you’re in the process of applying for a mortgage or already have a home financing solution. But what about protection options for credit card debt?

“Given the unprecedented circumstances of this year, many Canadians are trying to plan for the unexpected to protect themselves and their finances,” says Malloy. “TD balance protection plus is an optional product designed to help you deal with your credit card payment obligations in the event of a covered event, such as loss of employment.”

Continue Reading


Is your internet too slow? It’s probably not you





(NC) We all know the aggravation of a school lesson that just won’t stop freezing or the family video call that looks more like a photo montage. And, as we adjust to the impact of COVID-19 on our day-to-day, that slow connection can have frustrating consequences.

Working from home and learning remotely, both need fast, stable internet, something not enough Canadians have yet. Even if you have fast devices in your home, if the infrastructure in your area is not optimal, your connection won’t be either.

Right now, cities have the infrastructure needed to ensure access. But rural and remote communities are hugely underserved, with fewer than half having high-speed internet, and fewer than a third of households on reservations have high-speed connections.

Fortunately, change is coming. The Universal Broadband Fund is backing projects across Canada right now to ensure the reliable, high-speed internet connections families need to work, study, access services online, and safely stay in touch with each other.

The fund existed before COVID, but as a response to the pandemic, its timetable has been moved up by four years to a target of 98 per cent of Canadians with high-speed internet access by 2026. With the faster pace, at least 90 per cent of us should be connected by the end of 2021.

The fund is focused on improvements in rural and remote communities across Canada to fix the disconnect between internet access for urban and rural households.  This means more remote work opportunities, better access to remote learning and safer access to healthcare, no matter where you live.

It’s not just for good connections at home, either. The improvements mean much better access to mobile networks on highways between remote communities. The result is better, safer navigation and access to emergency services for your family, even on the road in the middle of nowhere. Mobile projects will be focused on serving Indigenous communities and the roads leading to them.

The shape these improvements will take in your area will depend on where you live. Canada is huge, and its communities are hugely diverse, with diverse needs. Keep an eye out for local projects — they’re a small part of something much bigger.

Continue Reading