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Hidden benefits of a mortgage calculator

If you're in the market for a house, you've probably used a mortgage calculator to determine your projected monthly payments. But homeowners and buyers can get a lot of additional information out of calculators, if they know how to use them.
If you choose to pay off your loan early, it makes sense to crunch the numbers before you plunk down the extra money. By using the "extra payments" function on your mortgage calculator, you can figure out how much money you'll save by shortening the life of the loan.
To figure out your savings, enter a hypothetical amount into one of the payment categories -- monthly, yearly or one-time. Then, click "Show/Recalculate Amortization Table" to see how much interest you'll pay over the new life of the loan.

Test the ARM

An ARM can mean lower monthly loan payments, but there's a risk if interest rates rise down the road. To measure your tolerance for that risk -- and your ability to make payments in the worst-case scenario -- you'll need to consult your mortgage calculator for the hard data.To gauge the risk, enter the ARM interest rate, leaving the term as 30 years. Then, compare those payments with what you'd get for a conventional 30-year fixed loan.
If you put less than 20 percent down on your loan, you likely had to buy private mortgage insurance. But once you pass the 20 percent threshold, you can ask your lender to remove that fee from your monthly payments.
How do you know when you've reached 20 percent equity? Plug the original loan amount into the mortgage calculator along with your closing date. Then click "Show/Recalculate Amortization Table," multiply your original mortgage amount by 0.8 and match the result to the closest number on the far-right column of the amortization table. This will show you when you'll reach 20 percent equity.


Online financial calculators aid homebuyer

Everyone wants to own their own place, but purchasing a home comes with a wealth of financial questions, the answers of which will impact the rest of your financial life. For homeowners having trouble sorting through questions and the data, an online financial calculator can help. Here are a few Web-based tools to help make your biggest financial decision a little easier.

How much can I afford?

When it comes to purchasing a home, the amount you can reasonably afford is the million-dollar question, even if your budget is considerably smaller than that. While financial circumstances differ from household to household, the maximum mortgage a family can take on boils down to the combined annual salaries versus household debts and the cost of a new home. Bankrate's maximum mortgage calculator can simplify the math for you. Taking everything from annual bonuses to alimony and child support into consideration, this online financial calculator provides a solid estimate of how much mortgage debt a household can sustain. Once families know how much debt they can handle, they can start the hunt for their perfectly priced dream home.

Rent or buy?

Knowing how much mortgage you can afford doesn't necessarily answer the question of whether it's smarter to rent or buy. Before purchasing a home, future homeowners must consider several factors. These include how long they plan to stay in the new home, whether the home's value will go up with time and how much they can afford as a down payment. Before signing on the dotted line, the rent or buy online financial calculator can help you figure out whether to make the leap into homeownership.

How much will it cost?

Many homebuyers only think about paying the loan principal plus interest. Few remember they'll also have to pay taxes, origination fees and home insurance. To help figure out total expenses, let an online financial calculator come to your rescue. To total up your monthly payment, the mortgage loan calculator takes these factors into consideration for fixed-rate mortgages.


Mortgage payment calculator has many uses

A mortgage payment calculator may seem quite simple. And, indeed, a basic calculator is easy to use. Just enter the loan amount, interest rate and term -- and voila, this online tool can figure out the associated monthly mortgage payment. That's helpful information for anyone who is shopping for a loan to purchase a house or refinance an existing mortgage.

More payment calculator variables

Beyond that, mortgage payment calculators can become complicated, but also offer borrowers more information.For example, a calculator might offer a way to add property tax and homeowners insurance expenses or mortgage insurance premiums to the monthly payment. Or, it might allow you to figure out the effect of making a larger payment every month, making an extra payment once a year or making a lump-sum payment.
Other functions can help borrowers understand adjustable-rate mortgage, or ARM, payments, biweekly payments or blended-rate or interest-only payments. Some calculators offer a built-in amortization schedule that shows all of the payments, divided by principal and interest, until the loan is paid off.
Mortgage payment calculators can also help borrowers figure out whether they might be able to get rid of mortgage insurance or weigh whether an ARM would be worth the risk compared to a fixed-rate loan. To understand the added risk of an ARM, use the calculator to compare the initial, fully amortized and highest possible payments to the payment on a comparable fixed-rate loan.

Types of mortgage calculators

Other types of mortgage calculators also can be helpful. Examples include calculators for: rates and points, a 15-year or 30-year term, a balloon payment, an annual percentage rate, a maximum loan amount and whether to refinance, among others.It's important to remember that any type of mortgage calculator is only as good as the data entered into its fields. Only when the right loan amount, interest rate, term and other information are entered can the calculator return accurate results.


How to use home loan calculators

If you're in the market for a new or refinanced home loan, you've probably encountered a number of mortgage calculators that ask for inputs and return results. These calculators can be helpful in your search for a loan, if you know how to use them and understand what they do.
Here's a quick snapshot of three calculators.

Mortgage loan payment calculator

A simple mortgage loan payment calculator uses three inputs:
  • Loan amount.
  • Interest rate.
  • Term.
The result is the monthly payment on a home loan of that amount with that term and interest rate.
This type of calculator may also offer other variables, such as an option to include the property tax and homeowner insurance in the monthly payment.
It's important to know that mortgage payment calculators typically assume a fixed interest rate. If the rate is variable, the payment could change.

Maximum loan amount calculator

A typical maximum loan amount calculator uses the borrower's income and debt obligations to calculate a maximum housing expense on a monthly basis. That figure is then used, along with an interest rate and term, to calculate a maximum loan amount for that borrower.It's important to remember that this type of calculator relies on ratios that might not apply to every borrower's situation. It also uses inputs for income and debts that lenders might not all count the same way.
Borrowers shouldn't automatically or necessarily get a home loan for the maximum amount they potentially can qualify to borrow.

Refinance savings calculator

A basic refinance savings calculator helps borrowers figure out how much they would save if they refinanced their mortgage.Typical inputs are:
  • Monthly payment, loan balance, interest rate and remaining term on the existing home loan.
  • Interest rate and term on the new loan.
  • Costs associated with refinancing.
The result will show the savings on the new monthly payment compared with the current payment.
This approach focuses only on the payment savings, not the total interest expense, which should be another consideration of whether to refinance an existing loan.


3 types of a mortgage calculator

While most consumers have probably used a basic mortgage calculator before, few are aware this powerful tool comes in multiple variations designed to answer specific questions. Here's what you need to know.

Should I make extra payments?

If you have the extra money, you may be tempted to increase your monthly home loan payments. But to determine whether that strategy makes good financial sense, you'll want to use the basic mortgage calculator. Simply enter the time remaining on the loan, the interest rate, and the length and amount of the mortgage to determine how many years those extra payments will shave off your repayment plan.

Should I use my home loan to pay of debt?

If you're thinking about using a home loan to pay off debt, it's a good idea to consult the debt consolidation mortgage calculator that's focused on paying off debt. You'll need to enter your credit card balances -- and any additional debt you want to consolidate -- as well as the outstanding amount on your current home loan. From there, you'll need to run several calculations, adjusting the loan amount term and rate to find a plan that fits your budget.

How much income do you need?

Knowing your income isn't the same as knowing how much income you need to qualify for a loan. To answer that question, use a mortgage calculator found at one of the links above. To run the calculations, you'll need to know the desired loan amount as well as your monthly liabilities and current housing costs.


Use an amortization schedule calculator

Where does all of the money go when you pay your mortgage each month? A portion of your payment goes toward principal and some is applied to interest. You can use an amortization schedule calculator to learn exactly how your lender divvies up these amounts.
To use Bankrate's amortization schedule calculator, you will need the following information:
  • Mortgage amount
  • Mortgage term
  • Interest rate
  • Start date
After you plug this information into the calculator, it will provide a schedule that shows how your payments are applied. The schedule will contain the following information:
  • Month/Year
  • Payment
  • Principal Paid
  • Interest Paid
  • Total Interest
  • Balance
You will notice that although your mortgage payment will remain the same each month, your principal paid will increase and the interest paid will decrease each month.
Homeowners are entitled to make extra payments on their mortgages. These payments can be made one time, annually or even monthly if they choose. An amortization schedule calculator can also enable you to see how making extra mortgage payments can affect your loan.

Why might you make extra payments?

Making additional mortgage payments won't reduce your monthly payment. However, all of the extra money that you'll be paying will go directly toward your principal. This means that you'll be paying less total interest and reducing the life of your loan.
Shelling out less money in interest and being mortgage-free sooner than you intended can be quite appealing. However, prepayment is not always the best course of action for everyone. Even though making extra payments can cut your interest costs and shorten your loan, some experts recommend avoiding prepayment unless you have additional savings. The extra money you pay on your mortgage won't earn you any interest, nor will it be readily available in the event of an emergency.


Use a home loan calculator to avoid errors

Home values have fallen by 30 percent, 40 percent or more in many parts of the country. Such low prices may be tempting you to take the plunge and buy a new home. But is that a wise choice for you? A home loan calculator can help you find out.
It's important to know exactly what you're getting yourself into before you make an offer on a new house, townhouse or condo. A home loan calculator, also called a mortgage calculator, can help you determine your monthly mortgage payments in advance, so you don't become "house poor," or worse -- run the risk of foreclosure.
When you plug some basic information, such as the mortgage amount, mortgage term, interest rate and mortgage start date, into a home loan calculator, you will get an estimate of how much a particular home will cost each month. In turn, you will be able to determine whether or not you can afford the monthly payments. A home loan calculator even allows you to see how adding extra payments can affect your loan.
A house is likely one of the biggest investments you will ever make. In addition to using a home loan calculator to make sure you aren't overextending yourself on your mortgage, make sure you have enough money set aside for your:
  • Down payment
  • Closing costs
  • Maintenance fees
  • Repair costs
  • Association fees
  • Property taxes
You should also consider factors such as how long you plan to live in the home and the home's prospect for appreciation. If you don't plan to stick around for a while, you might be better off renting. It can take several years before you recoup your initial investment and net a profit from the sale of your home.

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