Mortgage Calculators

All of us would like to own a home, but with sky rocketing prices, this dream is out of reach of many desirous would be homeowners. Financing a home is the only option and since mortgages gift you a considerable debt spread over an equally considerable time period, it is better to check all your options before taking the plunge to make yourself a debtor. Mortgage calculators are software tools that aid you to make an informed and smart choice concerning the different type of mortgages loans available to a person and his specific needs.

With the abundance of mortgage home loans available in the market, it is essential to use a mortgage calculators. It helps you to understand the expenditure you will be acquiring in the coming years. When all the information is put down in black and white its easier to understand and take a decision. Mortgage calculators are specialized user friendly tools that enable you to independently calculate the costs that you will be paying at the end of the day. These tools give you a modicum of independence and do not allow you to depend on a lender's estimation.

Once you have decided the type of mortgage loan you would like to take, you can then use the li to calculate your payments. You must be clear of the basic information, for e.g. a standard fixed rate mortgage loan you have to feed in the amount of money you have borrowed, the interest rate you have agreed upon and the life term of the loan. For E.g. if you enter $250,000 as the amount you have borrowed, $50,000 as down payment, 5.3% as your interest rate and 30 years as the loan term, the calculator gives you $1,111 as the monthly payment you have to make.

A more detailed home mortgage calculator needs more details like the value of the purchased house, down payment, loan term, the interest rate, yearly property tax, insurance and other miscellaneous costs concerned with mortgage. The mortgage calculator gives you an amount that is way ahead of the estimated $1,111. The small extras associated with mortgage are important and can create a considerable increase in your monthly payments. So factor them in when you use a mortgage calculator.

Another advantage of a mortgage calculator is that it helps you to check various options. Suppose you like a house that you would like to have as a home, but it costs $300,000. You can use a mortgage calculator to find out the monthly payments you would be required to make. If you enter borrowed amount as $300,000, $60,000 as down payment, 5.7% as the interest rate and a 15-year term, the mortgage calculator reads a monthly payment of $1,937. If this amount is more than you can pay in a month, you can change the term of the loan to 30-years and calculate again. This time around the calculator gives an amount $1,395. You can evaluate different options like changing the interest rate, even a slight change in interest can reduce your monthly payments. By changing amount borrowed, down payment, interest rate, and loan term you get a clear idea of what it takes and costs to buy a house.

There are different types of mortgage calculators:

Monthly payment calculator: This calculator provides information regarding different loans available and what your monthly payments will be with different loan choices.
Interest Only Mortgage Calculator: This type of calculator lets you know about standard monthly payments as well as interest only payments.
Amortization schedule calculator: this calculator provides you information on your monthly principal and interest payments. You can also check how high a monthly payment can reduce your principal balance and thus lessen your loan term.
Early Mortgage pay off calculator: Early Mortgage pay off calculator Calculates how early you can clear your mortgage, thereby saving money on interest.

Let us check some mortgage calculators:

Interest only calculator:

Interest only loans require small amounts to be paid initially for several years as the borrower pays off only the interest during this period. Once principal payments start the monthly payments increase. Since these loan terms are usually 30 years, it is better to have a clear idea what you will be required to pay and the corresponding adjustments you need to make.

Example:

A interest only loan of $100,000 at 5.5% interest requires a monthly payment of $458.33 for the first 15 years. After 15 years the principal balance begins to be paid and interest rates may begin to adjust and now the monthly schedule is $817.95 for the next 15 years. Borrowed mortgage amount-$100,000, Term-30-yrs, Starting interest rate-5.5%, starting monthly payments-$458.33.

Total amount payable-$229,574.83. Total interest payable-$129,574.83. Since interest rate remains constant, yearly payment is $5,499.96, for 15 years towards interest only. After 15 years principal balance payment starts and monthly payments increase to $817.95 for the next 15 years. Annual payments also increase to $9,804.

15-year mortgage versus a 30 year mortgage:

Since mortgages have a long time span, of nearly 15,20 or 30 years, it is in your interest to try to pay off your loan as soon as possible. Many factors affect a 15-yr and a 30-yr-loan term. A 15-year loan has less time period but the monthly payments are considerable, whereas a 30-year loan qualifies for smaller monthly payments that in turn translates into a considerable interest amount.

Example:

mortgage comparison of a 15-year and a 30-year loan.
Let the loan amount be $100,000 for a 15-year loan and $100,000 for a 30-year loan.
Interest rate is 6% for a 15-year loan and 6.250% for a 30-year loan.
Monthly payment is $843.86 for a 15-year loan and $615.72 for a 30-year loan.
Total interest is $51,894 for a 15-year loan and $121,000 for a 30-year loan.
Total payment is $151,000 for a 15-year loan and $221,000 for a 30-year loan.
Loan term also affects interest payments and income tax you pay.
A long-term loan increases income tax deductions.
First month payment interest is $500 for a 15-year loan and $520.83 for a 30-year loan.
First month principal is $343.86 for a 15-year loan and $94.82 for a 30-year loan.
First year interest is $5,885 for a 15-year loan and $6,217 for a 30-year loan.
First year tax saving is $1,471 on a 15-year loan and $1,554 for a 30-year loan.
Average year tax saving $865 for a 15-year loan and $1,014 for a 30-year loan.
A 15 year mortgage loan saves you $69,762 in interest but will cost you an extra $228 a month.
Total payment on a $100,000 15 -year loan is 1,51894 and total, payment on a $100,000 30-year loan is $221,000.

Adjustable Rate Mortgage calculator:

An Adjustable Rate Mortgage calculator (ARM) usually starts off with a lower interest rate, hence lower monthly payments. The risk though remains that the interest rates may rise in the future. The loan is usually of a 30-year duration and hence monthly payments may increase or decrease subject to interest rates.

Example:

Adjustable Rate Mortgage calculator (ARM) loan of $100,000 for a 30-year term with interest rates steady at 5.50% for 5 years. Hence monthly payment is $567.79 for five years. After five years the interest rates are expected to rise 0.25% per annum.

First 5-year interest rate is 5.5%
Monthly payment is $567.79
After 5-years interest rate is 5.75% and monthly payment is $581.67.
At 7-years interest rate is 6% and monthly payment is $595.32.
At 8-years interest irate is 6.25% and monthly payment is $608.69.
At 9 years the interest rate is 6.50% and monthly payment is $621.78.
At 10-years interest rate is 6.75% and monthly payment is $634.57.
The interest rate appreciates by 0.25% each year till near the end the interest rate is 11.75% and monthly payment is $787.77 which is the highest amount you will pay.
Loan amount-$100,000
Term-30-years
Starting interest rate-5.50%
First monthly payment-$567.79
Interest rate cap-12.0%
Expected adjustment-0.25%
Term for which interest is fixed-5-years.
Time between adjustments-1 year.
Total Payment-$246,922.98.
Total Interest paid-$146,922.98.