COST OF BUYING A HOUSE

Calculate the cost of buying a house

Calculate the cost of buying a house

Introduction

Buying a home has numerous fees and costs associated with it due to the complexity of the buying process. Since there are so numerous parties involves encompassing the buyers, seller, agents, inspectors, title companies, local government etc. these costs can add up making the face value of the house appear like an illusion when the real cost of the home is calculated. When buying a home calculating and adding in all the potential fees and costs involved should perfectly be factored into the price of the home and one's offer price. This assists offset the upfront expense with a quicker accumulation of capital and/or equity in the home in supplement to reducing the overall cost. This research paper will illustrate the numerous costs that are ideally considered when evaluating the cost of a home (Cornwall, 2003).

Discussion

Amortization Schedule

The amortization of a home loan can be one of the most costly parts of buying a house. It is significant to determine how the interest is calculated and applied to the monthly payments over the life of the loan. Often, a large majority of the interest is front end meaning the most interest is applied to the loan throughout the first years of the mortgage because that is when the loan balance is highest (Davis, 1999).

Since the interest component is highest in the earliest years of the loan, less of the monthly payment will be applied to paying off the principal amount of the mortgage loan instead. To calculate a mortgage amortization involves a little math, but can furthermore be achieved by using, financial planning software and online amortization calculator.

To show how amortization is calculated if a beginning mortgage balance is $100,000.00 and the concern rate is annualized at 6.25% the first months concern would $6,250.00/12=$520.83 if the monthly mortgage fee is $700.00, this entails only $179.17 of the capital is being paid of assuming no built in property tax and insurance payments. Each progressive month, as the principal balance of the loan is calculated, the dollar component attributable to the interest payment declines slightly and the capital fee rises slightly. Over the life of the loan, interest can add up to an amount equal to, if not greater than the actual amount of the mortgage in effect, doubling the cost of the house (Davis, 1999).

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