An individual can get money for a project through approaching lenders for mortgages. By putting an asset they own as collateral, and individual can get finances. The property which is mortgaged is usually set to be acquired by the lender if the borrower defaults in payment of the mortgage loan. For the property to remain as a possession of the individual who is borrowing, they will have to make the correct payments as per agreement.
Calculation of the payments can be processed by the use of a piti calculator. Principal and interest are the main amounts that are to be paid. The information given here breaks down the terms used in a piti calculator for easy understanding.
‘Mortgage amount’ is the total amount of the loan. ‘Term in years’ refers to the duration over which the loan is to repaid. Different lenders offer different durations for paying the same amount of loan. You are needed to clarify this duration with your lender, The ‘interest rate’ is the rate of return per year expected to be charged on the loan amount.
‘Monthly payment(PI)’ is a sum of the amount of principal and interest to be paid per month. These amounts are determined depending on the duration of loan payment and the interest rate. The ‘monthly payment'(PITI) comprises the PI in addition to the homeowner’s insurance and the property taxes to be paid per month.
Taxes paid for the property to be mortgaged are cited as ‘annual property taxes’. In calculation of PITI, the annual property taxes are distributed in monthly amounts. The ‘annual home insurance ‘ is the amount of money expected to be paid as homeowners insurance.When divided by 12, the amount gives the monthly charge used in the calculation of PITI. The figure is divided by 12 to give the monthly insurance charge.
The addition of the monthly charges which are paid to the lender gives the ‘total payments’ In its calculation, any amounts which are paid earlier as principal are excluded to give the right figure when using the PITI calculator. The ‘total interest ‘ is simply defined as the original amount of interest paid in the long run calculated as a percentage from the loan amount or principal.
The tail of the terms is the word ‘Savings’ The money that you would exempt yourself from paying if you made adequate preparations would be your saving.
As outlined above, the PITI calculator can be very helpful in preparing the borrower psychologically before going ahead to apply for the mortgage. A huge benefit that will be acquired from using this calculator is that the property you are to set under mortgage will be protected from auctioning by the lender or financial institution. Use of the Piti calculator will make you ready for the mortgage repayment period, and you would be wise to educate yourself on how to use it and calculate the payments for your next mortgage loan.