Types of Mortgage Calculators

If you are trying to decide how large a mortgage you can get, or even whether to buy a home at all, mortgage calculators can help you. You can find them on the Internet for free. Below are descriptions of different calculators you might find.

How Much Loan Can You Get

It's a smart idea before you go house searching to know roughly how large a mortgage you can afford. An affordability calculator will take into account all your debts (auto loans, credit card debt, etc), insurance and taxes for the new home, your income, and information about the loan itself to calculate the highest loan amount you a lender is likely to give you.

Monthly Payment

When determining whether or not you can afford a loan you should look at both the total amount you'll pay over the life of a loan AND what you'll pay each month. This monthly payment includes not only principal and interest but also taxes and insurance. A payment calculator takes all four factors into account to give you a true monthly payment.

Rent or Buy?

This wonderful tool will show you how much money you'll save or lose by renting, and how great a benefit buying a home might be. This calculator allows you to change the number of years used in the calculation, which is important because that can make the difference between whether renting is more advantageous or not. For example, if you were wanting to purchase a house and sell it after five years and wanted to compare it to renting for five years, you'd enter a "5" into the appropriate field in the calculator. The calculator might then tell you that you'd save $80,000 in monthly payments by renting. You'd also see that if you were to buy a home, even though you'd pay more money while you owned the house, when you sold it you'd earn both what you would have saved by renting AND an additional $5,000.

To Refinance or Not to Refinance?

Refinancing can save some homeowners money, but it can also cause them to lose money. Using a refinancing calculator can thus help you to make a wise choice. For example, if you were to refinance and then sell your home five years later, you might save $1,500. If you waited a total of 10 years, the savings would be $4,000. If you waited 25 years, you might in fact lose $7,500.

Good, Better, Best

Mortgage lenders provide different loan products from which to choose. It's important to compare the products to see which have the lowest monthly payment and which will end up costing you the most over the life of the loan. A calculator that helps you do this might take into account closing costs, interest rates, and points. Most calculators probably don't consider mortgage insurance, so be aware of this when looking at a loan that requires it.

Bi-Weekly Payments

Want to know if paying off your mortgage every two weeks will actually help you save money over paying once a month? There's a calculator for this too. It can show you how much quicker you'll pay off the loan and how much you'll save in interest. Because you won't pay as much in interest by paying every two weeks, you could lose out on some tax benefits. A good calculator will take this into account and show you a "net savings" by taking into account the loss in tax savings.

Using some or all of these mortgage calculators can help you make a better decision regarding buying or refinancing a home.

About the Author

If you're buying a home, find out more about mortgages at our Mortgage Help center.

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