Why Use A Mortgage Calculator?

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Why use a mortgage calculator?

If you’re considering buying a new home, refinancing a current mortgage, or paying off your current mortgage early, a mortgage calculator is one of the first places you should check.  There’s a lot of math that goes into making mortgage calculations, and a mortgage calculator can make it easy to compare your loan options by putting all the relevant cost information right at your fingertips so you can make smart financial choices.

You can use a mortgage calculator to find out:

  • What your monthly payments will be, which can help you determine how much home you can afford.
  • How much you’ll pay in interest over the life of the loan.
  • Whether it makes sense to pay for points to reduce your interest rate.
  • Whether an ARM or a conventional mortgage makes the most financial sense.
  • Whether it’s a smart idea to refinance — and how long you’ll have to stay in the home to break even on refinancing costs.

PenFed offers several different mortgage calculators:

To use any of these calculators, you do need to have some basic knowledge about your loan options — but nothing you won’t know if you’ve been considering getting a new mortgage. Most calculators will ask for:

  • The loan amount
  • The interest rate
  • The loan term

Some calculators with a specific purpose will ask for additional information to provide more details — for example, the refinancing calculator will also ask for your original loan amount and interest rate so it can compare your current costs to costs if you refinanced. If you aren’t sure what to put into any of the calculators for certain sections, give it your best guess or use the default setting — it will still help you get a ballpark estimate of figures.

What should I pay attention to on a mortgage calculator?
There are three numbers you should look for in mortgage calculators. Though not all calculators include all numbers, they’re important when they show up:

  • Your monthly cost: If the monthly payment isn’t something you can afford, it doesn’t matter if it’s a good deal or not. Make sure the payments fit in your budget, which may mean rethinking how much house you can afford or how quickly you can pay it off.
  • Your total cost: How much will you pay over the life of the loan? Loans with lower interest rates and shorter time durations will have lower costs over time, but you may have more up front costs (if you’re buying points to lower your interest rate) or higher monthly payments (if you have a shorter loan term). Comparing this number across different loans will give you an idea of the true cost of each option.
  • Your break even point: Some calculators, particularly if they’re comparing different financial options, will include a break even point. This tells you how long it will take for your savings to equal what you’ve spent to get the loan. This is important if you’re considering refinancing or buying points: the up-front cost of doing both will take some time to pay off in savings, and it may not be worth doing if you don’t plan to stay in the house long enough for you to break even.

Before you pick a mortgage, it’s important to spend some time with a mortgage calculator evaluating your options. By looking at all the associated costs, you’ll be able to pick the right mortgage — and maybe even save some money.

If you’re considering buying a new home, refinancing a current mortgage, or paying off your current mortgage early, a mortgage calculator is one of the first places you should check.  There’s a lot of math that goes into making mortgage calculations, and a mortgage calculator can make it easy to compare your loan options by putting all the relevant cost information right at your fingertips so you can make smart financial choices.

You can use a mortgage calculator to find out:

  • What your monthly payments will be, which can help you determine how much home you can afford.
  • How much you’ll pay in interest over the life of the loan.
  • Whether it makes sense to pay for points to reduce your interest rate.
  • Whether an ARM or a conventional mortgage makes the most financial sense.
  • Whether it’s a smart idea to refinance — and how long you’ll have to stay in the home to break even on refinancing costs.

PenFed offers several different mortgage calculators:

To use any of these calculators, you do need to have some basic knowledge about your loan options — but nothing you won’t know if you’ve been considering getting a new mortgage. Most calculators will ask for:

  • The loan amount
  • The interest rate
  • The loan term

Some calculators with a specific purpose will ask for additional information to provide more details — for example, the refinancing calculator will also ask for your original loan amount and interest rate so it can compare your current costs to costs if you refinanced. If you aren’t sure what to put into any of the calculators for certain sections, give it your best guess or use the default setting — it will still help you get a ballpark estimate of figures.

What should I pay attention to on a mortgage calculator?
There are three numbers you should look for in mortgage calculators. Though not all calculators include all numbers, they’re important when they show up:

  • Your monthly cost: If the monthly payment isn’t something you can afford, it doesn’t matter if it’s a good deal or not. Make sure the payments fit in your budget, which may mean rethinking how much house you can afford or how quickly you can pay it off.
  • Your total cost: How much will you pay over the life of the loan? Loans with lower interest rates and shorter time durations will have lower costs over time, but you may have more up front costs (if you’re buying points to lower your interest rate) or higher monthly payments (if you have a shorter loan term). Comparing this number across different loans will give you an idea of the true cost of each option.
  • Your break even point: Some calculators, particularly if they’re comparing different financial options, will include a break even point. This tells you how long it will take for your savings to equal what you’ve spent to get the loan. This is important if you’re considering refinancing or buying points: the up-front cost of doing both will take some time to pay off in savings, and it may not be worth doing if you don’t plan to stay in the house long enough for you to break even.

Before you pick a mortgage, it’s important to spend some time with a mortgage calculator evaluating your options. By looking at all the associated costs, you’ll be able to pick the right mortgage — and maybe even save some money.

If you’re interested in buying or selling a home, take a look at our Real Estate Rewards Program.

Posted in: Mortgages & Home Buying
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