3 cool things you can do with a mortgage calculator

How to use a mortgage calculator

Your basic mortgage calculator tells you three things: your principal and interest payment, the amount you will have paid over the life of the loan, and your decreasing balance over time as you make your payments, known as the name “amortization table”.

These are all useful things, but it’s what YOU do with this information that makes the calculator even more useful.

Here are things you might not know you could do with a mortgage calculator.

Avoid the “refinance penalty”

Refinancing your mortgage, even into a loan with a lower interest rate, can still cost you more in the long run if you’re not careful.

Indeed, unless you refinance your mortgage for a shorter term, you are restarting the countdown to your repayment.

If you refinance a 30-year home loan after five years and replace it with another 30-year loan, you extend your repayment to 35 years. This offsets some or all of the benefits of your refi.

A mortgage calculator can help you refinance smarter. To take full advantage of your refinance, simply enter your remaining principal balance as the purchase price, a zero down payment, the refinance interest rate, and the number of years required to pay off your mortgage on time.

For the example above, your term would be 25 years (the 30-year term minus the five years already paid).

The resulting payment is the amount you would send each month – your regular payment, plus an additional principal reduction.

Estimate your future ARM payment

If you don’t expect to keep your home and mortgage for many years, a 5/1 ARM may make sense. Its initial interest rate is typically about one percent lower than a 30-year fixed loan, and its rate is fixed for the first five years.

But what if you end up keeping your house for six or seven years? Could your MRA become unaffordable?

You can use the mortgage calculator to plan ahead.

Enter the terms of the ARM you are considering. Click “View Full Report” and note what your balance will be in five years. Ask your lender about the loan caps — most 5/1s allow a rate increase of no more than two or three percent over their starting rates in the sixth year.

As of this writing, you can find 5/1 ARMs at 2.25%, and we’ll use a loan amount of $200,000 as an example. The principal and interest payment in this case is $764, and the balance after five years is $175,290.

By comparison, a $200,000 30-year fixed loan payment at 3.25% would be $870, and its balance after five years would be $178,614 – in five years you’d save $9,684 with the loan. ‘ARM.

But what happens in sixth grade?

Go back and enter a new loan – your purchase price is your loan balance, $175,290 (no down payment), your term is the remaining 25 years of your loan, and your rate is the worst case – the starting rate plus your maximum adjustment.

If your cap is 2%, your highest rate in year six is ​​4.25% and your maximum payment is $950.

Note that this is your worst case scenario. To get something that is perhaps more realistic, ask the lender what the loan rate would be if it reset today. Use this rate with a 25-year term.

If the payment is unacceptable to you, or if the worst case scenario gives you nightmares, a 5/1 loan may not be the right loan for you.

Estimate your savings with accelerated payments

It’s easy to use a mortgage calculator to estimate how much you’d save by paying off your mortgage early.

Enter your loan amount and interest rate, and note the resulting principal and interest payment.

We’ll use the 30-year fixed example above – with a balance of $200,000 and a rate of 3.25%. This payment is $870 and over 30 years, if you click on “View Full Report” you will see that you will pay $113,000 in interest over 30 years.

Then you’ll change the term to something shorter than 30 years – 25 years, for example. You’ll see that paying $975 a month cancels your loan five years early and saves you $21,000 in interest.

Note: If you plan to pay off a 30-year mortgage in less than 25 years, consider a 20- or 15-year fixed rate mortgage. They usually offer lower interest rates than 30-year loans, so your extra payment will go further.

As of this writing, for example, lenders are offering 3.0% rates on 20-year loans to highly qualified applicants. The payment for our sample loan is $1,100 per month, and the total interest paid is only $47,000 less than the 30-year loan.

Mortgage calculators can help you do a lot – see how much home you can afford, compare different mortgage products, and visualize prepayment strategies – all important for successful home ownership.

What are the prices today?

A mortgage calculator tells you how much a low rate can save you. Just a quarter of a percent difference can make a big difference.

Get a quote and benefit from today’s ultra-low rates. It’s your first step to getting great mortgage value in today’s rate market.

The information contained on The Mortgage Reports website is provided for informational purposes only and does not constitute advertising for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent company or affiliates.

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