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Through lending financial institutions, an individual can get financing by acquiring a mortgage. By putting an asset they own as collateral, and individual can get finances. 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.
A piti calculator can be used to calculate the estimated mortgage payments that you would pay for the loan. These payments include the principal and interest. This article explains some of the key terms to understand before using the Piti calculator.
‘Mortgage amount’ is the total amount of the loan. ‘Term in years’ refers to the duration over which the loan is to repaid. The time for repayment differs with different mortgagees. Confirming this with the institution you wish to borrow from is important. 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’ These amounts are determined depending on the duration of loan payment and the interest rate.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 insurance charge paid for the property in question is referred to as the ‘annual home insurance ‘ For the calculation of PITI, the sum is divided by 12.
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’ 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. It will go a long way to ensure your property is secured against being acquired because of loan repayment defaults. To conclude, the use of a PITI calculator to get your mortgage payments is highly advised as a measure of preparation and to keep you on track with your payments.