How to Analyze Payment Options With a Mortgage Calculator
Mortgage lenders may offer a potential home buyer either a fixed-rate mortgage or adjustable-rate mortgage. The buyer who knows the cost of the home and the down payment can use mortgage calculators to compare mortgage offers. Several online websites offer free mortgage calculators for both fixed and adjustable rates.
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Instructions
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TimeValue
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Access the TimeValue online mortgage calculator for fixed rates (see Resources). A fixed-rate mortgage maintains the same interest rate and mortgage payments throughout the life of the loan.
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Enter the price of the home, the down payment, the mortgage interest rate and the term of the loan. You may replace these variables depending on any particular offers you get from mortgage lenders.
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Click the "Calculate" button. The calculator computes the monthly mortgage payment you would pay. Look at the "Total finance charge" figure to see what you must pay in addition to the price of the home. The "Total payments" figure tells you the absolute total you must pay by the end of the loan. Compare total payments and finance charges in addition to the monthly payment when analyzing payment options.
GMAC Mortgage
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Access the GMAC Mortgage "Adjustable Rate Mortgage Calculator" (see Resources). Home buyers should analyze payments for adjustable-rate mortgages for the low initial interest rates. However, the rate can either decrease or increase at set intervals after an initial period. The rate changes based on the index agreed to with the lender. Lenders also set a cap (maximum) for the interest rate. Determine the maximum monthly and total payments when considering offers with an adjustable rate.
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Enter loan amount (the price of the home minus down payment) as the "Mortgage amount." Enter the other data for particular mortgage offers. You can keep the "Expected adjustment" as the default. You can only estimate payments on adjustable rates because no one knows the future index rate.
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Click the "Calculate" button to see the total payments and maximum monthly payment. Consider your ability to pay the maximum possible monthly payment when you analyze mortgage payments with an adjustable rate.
Yahoo! Real Estate
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Access the comparison mortgage calculator on Yahoo! Real Estate (see Resources). This calculator compares a fixed and adjustable rate for the same loan.
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Enter the "Loan amount" and the data for both fixed and adjustable rates. Click the "Submit" button to view the mortgage comparison.
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Look at the comparison page to determine the better offer based on total payments. The results also show you the monthly payment for a fixed rate and the various monthly payments for an adjustable rate.
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Tips & Warnings
Evaluate the payment schedule by year for various loans based on your particular scenario: Do you plan on moving in five years? In 10 years? What are the range of possibilities for an ARM payment by then? How much principal will you have paid off for various types of loans?
If you already own a property, use the data from the mortgage calculation to answer: With an eye on closing costs and expenses, does a refinance make sense now? How long will I have to live in the house for the refinance to pay off?
Always factor in additional charges from a mortgage lender. You need to demand a written breakdown of all charges and include those in your analysis of payments on mortgage offers.
References
Resources
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