# 3 cool things you can do with a mortgage calculator

## How to use a mortgage calculator

Your base mortgage calculator tells you three things: your principal and interest payment, how much you will have paid over the life of the loan, and your declining balance as you make your payments, called your “Amortization schedule”.

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

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

Check your new rate (August 3, 2021)

## Avoid the “refinancing penalty”

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

This is because unless you are refinancing to a shorter mortgage term, you are restart the clock on your refund.

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 get the most out of your refinance, simply enter your remaining principal balance as the purchase price, a down payment of zero, the refinancing interest rate, and the number of years it takes to withdraw 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 plan on keeping your home and mortgage for many years, a 5/1 ARM may make sense. Its initial interest rate is usually 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 ARM become unaffordable?

You can use the mortgage calculator to anticipate.

Enter the terms of the MRA you are considering. Click on “View full report” and write down what your balance will be in five years. Ask your lender what the loan limits are – most 5/1s allow a rate increase of no more than two or three percent from their starting rates in year six.

As of this writing, you can find ARM 5/1 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.

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

But what happens in the sixth grade?

Go back and enter a new loan – your purchase price is equal to your loan balance, $ 175,290 (zero 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 payout is $ 950.

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

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

Check your new rate (August 3, 2021)

## Estimate your savings with expedited payments

It’s easy to use a mortgage calculator to estimate how much you would save by prepay your mortgage.

Enter your loan amount and interest rate, and write down 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 “View Full Report”, you will see that you will be paying $ 113,000 in interest over 30 years.

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

Note: If you plan to pay off a 30-year loan 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 goes further.

As of this writing, for example, lenders are offering 3.0% 20-year loan rates to highly qualified applicants. Our sample loan payment 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 of things – see how much home you can afford, compare different mortgage products, and visualize prepayment strategies – all important to successful homeownership.

## What are the rates today?

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

Get a quote and take advantage of today’s ultra-low rates. This is your first step in getting great mortgage value in today’s rate market.

Check your new rate (August 3, 2021)