Buying a House (Financial Calculators)
This page contains frequently asked questions regarding buying a house, choosing the right mortgage, and calculating monthly payments. Use the pulldown menus to view the questions, answers, and related webpages.
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Should I Buy or Rent? 8 Signs You Should Not Buy a House
Consider renting if any of these scenarios describes you. (Morningstar Personal Finance – 10/25/09)
Is Now the Time to Buy Your First Home?
Schwab Resource Center – 8/17/11
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Comparing Mortgage Terms (i.e. 15, 20, 30 Year)
Different mortgage terms and rates can make the loan selection process confusing, especially if you don’t plan on keeping the loan for the full term. Use this calculator to determine the total cost in today’s dollars of various mortgage alternatives, taking into account your opportunity cost of money.
The loan amount, the interest rate, and the term of the mortgage can have a dramatic effect on the total amount you will eventually pay for the property. Further, mortgage payments typically will include monthly allocations of property taxes, hazard insurance, and (if applicable) private mortgage insurance (PMI). Use this mortgage calculator to see the impact of these variables along with an amortization schedule.
Adjustable Rate Mortgage Calculator
Unlike fixed rate mortgages, the payments on an adjustable rate mortgage will vary as interest rates change. Use this adjustable rate mortgage (ARM) calculator to see how interest rate assumptions will impact your monthly payments and the total interest paid over the life of the loan.
Which is Better: Fixed or Adjustable-rate Mortgage?
It is sometimes difficult to decide between a fixed or an adjustable-rate mortgage. Factors such as loan duration, the index used by the lender, the number and timing of rate adjustments, and your assumption about the increase/decrease of future interest rates all have an impact. Use this calculator to help compare the total cost of each alternative.
Compare a ‘No-Cost’ vs. Traditional Mortgage
Many lenders will offer a ‘no-cost’ loan in lieu of a traditional mortgage. ‘No-cost’ loans are generally priced at a higher interest rate than a traditional mortgage. The higher rate allows the lender to make enough money on the interest rate spread from the underwriter to pay for all your closing costs and provide them with their profit. Use this calculator to help determine if a no-cost loan with your lender is better than a traditional mortgage.
Compare an Interest-only vs. Traditional Mortgage
An interest-only mortgage may be enticing due to lower initial payments than a traditional mortgage. However, when the interest-only loan begins to amortize after 5, 10 or 20 years, your monthly payments will be higher. Use this calculator to determine the monthly payments, timing and total interest paid with each loan type.
Should I pay discount points for a lower interest rate?
In some cases, it may benefit you to ‘buy down the interest rate’ by paying extra money up front in the form of discount points. Use this calculator to help determine if this makes sense for you.
Should I Pay Off my Mortgage? Four Questions to Ask Before Paying Off a Mortgage
Morningstar Personal Finance – 2/27/12
Should I Convert to a Bi-weekly Payment Schedule?
It may surprise you that most banks and mortgage companies collect two to three dollars for every dollar that you borrow! However, there is a way to accelerate mortgage payoff using a method called Bi-Weekly Mortgage Payments. This program is implemented by dividing your monthly mortgage payment in half and paying it every other week – resulting in a net effect of paying an extra payment toward principal each year.
What are the Tax Savings Generated by my Mortgage?
With the interest on a mortgage being deductible when you itemize deductions, it may surprise you how much you can save in taxes. Use this calculator to determine your potential tax savings with a mortgage. (Consult your tax advisor regarding the deductibility of interest).
Please check out this brief educational webinar from Retiremap about buying a home.
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