House Buying - How Much Home Mortgage Can I Afford?
How much you can afford is a function of two things:
How much you can borrow and how much down payment can you muster. The two are interrelated, but we've broken this worksheet into two parts so you can see how each factor affects the mortgage equation.
So you've been browsing the real estate section, looking for your next home. Chances are, no matter where you live or what you're looking for, you're worried about home prices and whether or not you can really afford to move.
Initial Costs are the rent security deposit and, if applicable, the broker's fee.
Yearly Costs are the monthly rent and the cost of the renter's insurance.
Lost Opportunity Cost are calculated each year for both your initial costs and your yearly costs.
Leaving your rental is equal to the rent Security Deposit, typically returned to a rent at the end of a lease.
Should You Refinance?
KNOWING EXACTLY when is the perfect time to refinance would require a bit of psychic ability on your part. That’s why many experts say if you find a good deal that saves you a significant amount of money, it’s probably not worth trying to beat it by predicting mortgage-rate moves.
So what rate would you need before refinancing makes sense? That’s what this worksheet is designed to tell you. One thing to keep in mind, though: The interest rate isn’t the only thing to consider when shopping for a new loan. Refinancing, after all, isn’t free. There are the bank fees, the bills for a new appraisal and inspection, your lawyer’s fee — you name it. This worksheet will help you figure out how much you’ll save on your monthly payments with a lower rate and how long it will take, given those savings, to repay the cost of getting a new loan.
Purchase costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and typical closing costs.
Yearly costs are recurring monthly or yearly expenses. These include mortgage payments, condo fees (or other community living fees), renovation costs, maintenance costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller.
Lost opportunity costs are tracked for the initial purchase costs and for the yearly costs. The former will give you an idea of how much you could have made if you had invested the down payment instead of buying your home.
Selling costs are the costs you incur when you go to the closing for the home you are selling. This includes the broker’s commission and other fees, as well as the remaining principal balance that you pay to your mortgage bank. “Proceeds from home sale” is the money that you receive from the person who is buying your home. This amount is equal to the value of the home that year and is shown as a negative number since it is not something that you spend money on, but rather, it is money you receive.
If your cumulative buying total is negative, it actually means you have done very well: you made enough of a profit that it not only covered the cost of your home, but also all of your yearly operating expenses.