Many Uses for a Mortgage Calculator

A mortgage calculator is a handy way to figure out how much of a mortgage loan you can afford, or what your monthly mortgage payments would be if you borrow a certain amount. But there are lots of other ways they can be useful in handling your mortgage-related finances as well.

Think refinancing. Think tax time. Think accelerating your mortgage payments or paying off your loan early. Think comparing different mortgage options to determine which is best for you.

The basic function of a mortgage calculator, of course, is to determine what the monthly mortgage payment will be on a home loan of a given size, interest rate and duration. You plug the numbers in and the calculator gives you the answer. Some also include features that allow you to calculate related costs such as homeowner’s insurance and taxes to figure out what your total monthly housing bill will be.

Using the mortgage amortization schedule to your advantage

But a mortgage calculator can also do much more, particularly if it can provide an amortization schedule showing how fast you’re paying off the loan. An amortization schedule will not only show how much you’re paying in principle and interest each month, but also updated totals for each over the life of the loan.

This is a powerful tool, because it quickly shows how changing various terms of a loan affect how much you pay, how fast you pay it off and how much your interest payments are. Running different numbers through the mortgage calculator can help you determine which are the best mortgage options for you and help you adjust your financial strategies. Some examples are:

Mortgage shopping/ interest rates, points and closing costs

Discount points allow you to reduce your interest rate by paying a fee up front, typically equal to 1 percent of the amount borrowed for reducing the interest rate by one-eighth of a percentage point. Similarly, you may be comparing two mortgage offers, one of which has higher closing costs but a lower interest rate than the other. Which is the better deal?

Paying additional costs upfront for a lower interest rate is a strategy that typically takes several years to pay off. Using a mortgage calculator amortization table to compare the two loans, you can see at what point the costs of one loan will fall below that of the other, and decide whether the difference is great enough to make it worth your while.

Accelerated payoff

Thinking about paying off your mortgage faster? Wondering how much sooner you’ll pay off your 30-year mortgage if you make a small, but consistent, increase in your monthly payments during the early years? The amortization table will not only show your new payoff date, but will also illustrate how much faster you’re building equity, if your goal is to sell, refinance or eliminate private mortgage insurance (PMI) in a few years.

Refinancing

The big question about mortgage refinancing is whether the closing costs needed to obtain a new loan are worth the lower interest rate you can obtain by refinancing. Using the mortgage calculator, you can add in the new closing costs, along with the reduced interest rate and new payment schedule, then use the amortization chart to see how long it will take you to reach the “break even” point. You can also see what your total savings would be over the life of the loan, as well as your total interest payments compared to your current mortgage.

Interest payments

Interest payments are an often overlooked aspect of mortgage costs, especially when refinancing. You’ll save money by reducing your interest rate or paying your mortgage off faster – BUT – you’ll also lose the tax breaks those interest payments provide. Since mortgage interest is what allows many homeowners to itemize their deductions in the first place, it’s good to know just when your interest payments might fall below the cutoff on an accelerated payoff or refinanced mortgage. Also, tax impacts tend to lessen the overall savings of reducing your interest payments, so it’s good to take that into account.

These are just some of the ways you can use a mortgage calculator and amortization schedule to your advantage. Basically, if you’ve got a question about the pros and cons of different approaches to handing a mortgage, you’ll find it in the amortization tables. It’s worth your while to get familiar with them.

Feel free to use the Cornerstone Mortgage's on line calculator. Here is the link. http://www.cornerstonestl.com/calculators/index.html

Five Tips to Help Raise Credit Scores

Start by getting free copies of your three major credit reports at the government-authorized site annualcreditreport.com.

1. Check your reports for accuracy. Financial columnist Liz Weston, author of "Your Credit Score," says to look for credit cards or other accounts that aren't yours, negative entries that are more than seven years old, duplicate past-due items and incorrect Social Security number or date of birth.

2. Dispute errors. Credit bureaus are required by law to investigate mistakes you bring to their attention and report back to you. Typically, they ask the creditor that reported the past-due information to check its records. If the creditor can't verify the info or doesn't respond, the item should be deleted.

3. Pay your bills on time. Payment history makes up more than one-third of the typical credit score determination, Weston says, so paying bills on time all the time is essential to maintaining good scores. If you're forgetful, consider setting up automatic payments through your bank.

4. Pay down your debts. Lenders look at how much of your available credit on cards and credit lines you are using. If you are maxed out or close to it, lenders could assume you're on the financial edge and not lend you money.

5. Keep credit cards and other revolving accounts open. You may be tempted to close old accounts you're not using, but that won't help your credit scores and may actually hurt them. It reduces the amount of your available credit, which can lead to lower scores.