Interest Rate in 3 Easy Steps
Loan Modification Calculations Made Easy
Are you thinking about applying for a Loan Modification? If so, get ready for what will feel like a long and frustrating process. Many homeowners wait 8, 9, 10 months or longer just to receive a letter from their lender with the words
“You Do Not Qualify”
Before starting your journey, why not see if makes sense to apply?
Using your own income and property expenses, you can do a simple loan modification calculation to find out what interest rate you can afford. If the interest rate is higher than 2%, you stand a very good chance of getting a loan modification.
Loan Mod Calculator vs. Mtg Payment Calculator
Loan modification calculations are basically the same thing as a mtg payment calculator, but in reverse. Whereas a Mtg Payment Calculator performs loan calculations and payment information, based on the principal, loan term, and interest rate, a Loan Mod Calculator does the opposite. A Loan Mod Calculator takes your maximum affordable monthly payment and the remaining outstanding loan balance, and then returns the interest rate for either a 30 year or 40 year period. Your lender will then see if they can get your interest rate reduced to this calculated interest rate.
Loan Calculations and Payment Amounts
(How does a Loan Mod Calculator Work?)
HAMP guidelines require a homeowners loan payment to not exceed 31% of the gross monthly income (or loan modification income) of the borrowers on the mortgage. This loan modification income amount is the highest amount that banks can use for loan calculations and payment reductions.
Once you’ve determined the loan modification income, you want to subtract monthly payments for real estate taxes, homeowner’s insurance, and any Homeowner Association Fees or Maintenance Fees. What’s left over is the amount that can be applied to your principal and interest payments. This is your Maximum Monthly Mortgage Payment amount.
Once you’ve determined Maximum Monthly Mortgage Payment amount, you can search Google for “mtg payment calculator”, “mortgage calculator”, or “house payment calculator”. Then simply put in the outstanding loan balance, select a 30 year term, and enter 2% for an interest rate. If the mtg payment calculator returns an amount that is LOWER than payment amount you calculated, then simply raise the interest rate by 0.25% until the mtg payment calculator returns a payment amount that is very close to your calculated amount.
Sound confusing? Well it sorta, kinda is because calculating the interest rate for a given payment, is actually a fairly complex mathematical problem. Luckily, the computer comes to the rescue and can run through these calculations very quickly.
Loan Mod Calculator To The Rescue
The Loan Mod Calculator above makes the complicated process described above very QUICK & EASY. It takes all of the variables described above and performs the complex loan modification calculations for you. After you enter in your information, the Loan Mod Calculator automatically adjusts for real estate taxes, insurance, and homeowner association fees to determine the same loan calculations and payment amount above. This amount is the highest Principal & Interest Payment allowed based on your income and housing expenses. The Loan Mod Calculator uses this payment amount and the current unpaid loan balance to calculate the highest affordable interest rate.
How To Use The Loan Mod Calculator
| Step 1: | How often do you get paid? Getting paid annually vs every 2 weeks vs weekly affects your Gross Income. Select the payment schedule for each borrower. |
| Step 2: | Enter the Gross Monthly Income for all borrowers. This is the amount you get paid before any taxes are taken out. If there is a 2nd borrower on the loan, enter their information into the column labeled Borrower 2. If there are 2 wage earners in the household, but only 1 borrower signed the mortgage documents, do NOT include the 2nd borrower’s income (leave Borrower 2 column blank). |
| Step 3: | Enter the Real Estate Taxes owed for the year. |
| Step 4: | Enter your Homeowner’s Insurance Amount and how often you pay that amount. The Loan Mod Calculator uses this information to convert your insurance payment amount into a monthly amount to be used in the loan modification calculation. |
| Step 5: | Enter in any Homeowner Association Fees and Homeowner Association Maintenance Fees. Some developments have only 1 payment that includes both, and other developments break the payments into 2 separate amounts. |
| Step 6: | Click the Next button. |
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If you are thinking about applying for a Loan Modification, it's always a good idea to see what Interest Rate you qualify for.
Yet most 3rd Party companies, attorneys, or housing counselors can't or won't provide homeowners with this basic information.
Why not?
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