One of the ways which property owners can access funds from lenders, for example, banks, is through getting a mortgage loan. By putting an asset they own as collateral, and individual can get finances. The surety becomes the property of the mortgagee if the loan is not repaid. That said, it is therefore of very great importance that the borrower honors their obligation towards the loan to avoid losing their property.
A piti calculator can be used to calculate the estimated mortgage payments that you would pay for the loan. Principal and interest are the main amounts that are to be paid. This article explains some of the key terms to understand before using the Piti calculator.
‘Mortgage amount’ is the total amount of the loan. The ‘term in years ‘describes the number of years over which the mortgage loan is to be repaid. The time for repayment differs with different mortgagees. It is therefore important to clarify this with your lender. The money that stands as the charge for getting the loan is known as the ‘interest rate’
‘Monthly payment(PI)’ is a sum of the amount of principal and interest to be paid per month. After ascertaining the duration of payment and the interest rate, these amounts are decided.An addition of the PI, homeowners insurance and property taxes gives the ‘monthly payment'(PITI).
The amount paid in taxes for the property is referred to as the ‘annual property taxes’ In calculation of PITI, the annual property taxes are distributed in monthly amounts. The ‘annual home insurance ‘ is the money paid in premium for the insurance of the property.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.
Last in the list is the ‘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. Possession of the asset that you are putting on the lender will be assured because you will have adequately prepared. It is recommended to use the Piti calculator to ensure your payments are at the right time and to keep you aware of amounts that are to be paid.
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