Through lending financial institutions, an individual can get financing by acquiring a mortgage. A structure owned by the person asking for a mortgage can be used as a warranty for repayment of finances given. The institution giving the loan will acquire the property if the loan defaults. 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.
The piti calculator is an easy way of ensuring that you have all your payment amounts right. 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 period through which the borrowed amount is to be paid is called the ‘term in years’ The time for repayment differs with different mortgagees. You are needed to clarify this duration with your lender, The money that stands as the charge for getting the loan is known as the ‘interest rate’
The total of the principal and interest charge is termed as the ‘monthly payment’ The time given for paying the loan is used to calculate the ‘monthly payment’ The ‘monthly payment'(PITI) comprises the PI in addition to the homeowner’s insurance and the property taxes to be paid per month.
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 amount of money expected to be paid as homeowners insurance. For the calculation of PITI, the sum is divided by 12.
When the amounts given to the mortgagee per month are added, they round up to give 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. When the loan charges paid per month are summed up, they give the ‘total interest ‘
Last in the list is the ‘Savings’ Its definition is the amount you will be spared from paying if you make the required preparations before going for the loan.
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. 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.