Expenses Involved In Home Purchase (Mortgage)
How much does a home cost? Before you get too comfortable with the asking price in the real estate ad, you should be aware of all the expenses you will be expected to pay.
First, there is the price of the home itself. The seller offers his or her house for sale at the asking price. This price may be negotiable depending upon the condition of the home and other factors. After the negotiations are done, the agreed-upon price becomes the cost of the home. To secure this cost, the buyer is expected to make a non-refundable payment to the seller. This is called earnest money. This amount will be deducted from the amounts paid when the sale is completed.
How Do You Finance A Home?
Presuming you do not have a very large supply of cash on hand, you will have to finance your home with a mortgage. A mortgage loan is essentially a secured loan that uses the home as collateral. Mortgages are typically paid in monthly installments over several years - usually 15 or 30 (40-year mortgages do exist, but they are not offered by every lender).
Mortgages contain two distinct parts:
- Principal. The amount you need to borrow to pay for your home and closing costs.
- Interest. What you pay the financial institution for the use of its money.
How Do You Increase The Value Of A Home?
Unlike with many other kinds of investments, there are a number of things you can do to increase the investment value of your home.
This increase in value can result in a capital gain to you when you sell your home. Your capital gain is the amount you sell your home for,
minus your cost basis. Your cost basis will be the principal amount you paid for the property, plus the value of any substantial capital improvements (e.g. building a patio, additional bedroom, etc.) you may have invested in, but not including the cost of ordinary repairs and upkeep. The good news is that most people who incur capital gains upon the sale of their personal residences will not have to pay tax on the gains, due to the current exemption limits. The old adage that the three most important attributes of real estate are "location, location, and location" is worth remembering when you buy a home. A mortgage calculator can assist you when buying a home as well.
Mortgage loan amount
The amount you wish to borrow for your home mortgage.
Annual interest rate
The interest rate for this home mortgage loan.
Number of months
The number of months you wish to finance this home mortgage loan. 30 years = 360 months, 20 years = 240 months, 15 years = 180 months.
Desired amortization schedule
After clicking Submit, an amortization schedule will be shown. You can control whether you want it to display year-by-year or month-by-month.
Sale price of property
The selling price of the home you are selling, if applicable. Otherwise leave at $0.
Let system estimate property taxes, insurance, and private mortgage insurance?
Select 'yes' if you want the calculator to estimate these values for you based on national averages. If you would like to specify these values, select 'No'
Annual property taxes
The annual amount you expect to pay for property taxes.
Annual hazard insurance
The annual amount you expect to pay for hazard/homeowner's insurance.
Monthly private mortgage insurance
The monthly amount you will be required to pay by the lender for private mortgage insurance (PMI).