Mortgage Calculator Tips & Tricks

The term "mortgage calculator" is one of the most sought after terms on the internet and yet serves virtually no purpose in the mortgage shopping process.

For example, the adjustable rate mortgage calculators can be very misleading in terms of what you get and what you really want to know.

The adjustable rate calculators give you a "what if" type of output and can be way off simply because there's no way to know what your adjustable rate will increase to 5 years from now (using the 5 year ARM as an example).

You must beware though, most of the online mortgage calculators are a ploy designed to capture your information such as name and email address - so you can be bombarded with mortgage brokers calling your house 3 times per day offering the lowest interest rate.

I'll be giving you access to some useful mortgage calculators throughout this section of the website however NONE of them are designed to capture your name, email or any other personal information. All of the mortgage calculations done here will be risk free and without all the unnecessary information you'll find elsewhere.

What's The Best Use For A Mortgage Calculator?

If you are contemplating a home refinance, the refinance calculator can help you compare the savings or cost of a refinance and is the best of the home loan mortgage calculators.

One option you should be looking for in a mortgage refinance calculator is the ability to calculate how closing costs compare to the loan amount AND the interest rate, not just the interest rate and loan amount only. Refinancing is big business so beware of refinance mortgage calculators that ask for more than just the basic numbers. We'll cover the best places to apply for a mortgage online in the refinance section of this website.

You should NOT be using any mortgage calculator to calculate mortgage payments specifically - this tool should only be used to make loan comparisons.

I say comparisons only simply because most mortgage calc figures leave off things such as mortgage insurance, state and local taxes and closing costs in relation to APR.

Some misunderstood terms that the uneducated home shopper tends to look for by searching for are;

"mortgage rates calculator"
There's no calculator available that will provide true and accurate mortgage rates. Don't be sucked into the advertising that makes you believe such things. No matter whether you're seeking a new home mortgage or a refinance, most mortgage calculators only provide the basic math and miss things such as closing costs or taxes so beware.

"affordability mortgage calculators"
Affording a home is not a simple calculation. The best way to determine affordability (i.e. will you get approved) is to compute your debt to income ration (DTI) by simply dividing your estimate monthly recurring credit debt (that which shows on your credit report) including the estimated house payment by your total monthly income. The percentage you get is your DTI and as a rule of thumb lenders want you to stay at 45% DTI or less on your first mortgage.

To figure your DTI; (total recurring credit debt & house payment) divided by (total monthly income) = DTI

If I pay $700 in credit card payments and $1500 on my mortgage, and earn $5800 per month my DTI is;

$2200 / $5800 = 37.9% DTI

Most mortgage calculator tools won't show you those critical numbers. I say critical because your loan approval is based mostly on your ability to repay which is directly related to your DTI or debt to income ratio.

Another misunderstood form of the mortgage calculator is the bi weekly mortgage calculators.

If you understand the bi weekly mortgage craze you know that by paying half your mortgage every 2 weeks you end up actually making one extra payment per year - saving a lot of money in the mean time.

Don't be fooled by this simple calculation. Anyone disciplined enough to make an extra payment per year can avoid the hassle (and extra fees) of setting up a bi weekly payment arrangements. I suggest taking the $550+ you'll spend setting up and using a bi weekly mortgage account and put that toward your mortgage, saving even more.

The interest only mortgage calculators can be useful if used properly.

The idea behind the interest only loan mortgage calculators is to free up extra monthly cash and use it in tax favored investments. For example if you save $150 per month on your mortgage payment by financing with an interest only loan then that's $1800 per year that you can put to work for you and you don't have to refinance or qualify for a loan to receive the savings over and over again. Most people miss that.

It's like a refinance kickback every month without paying any refinance fees or having to qualify for the cash which is yours anyway. If you're trying to calculate interest only mortgage payments watch out for the missing info such as taxes, title insurance and points etc. - all of this loan lingo can get confusing so be sure to visit the main menu and make sure you're up to speed.

One other misleading mortgage calculator is the reverse mortgage calculator.

Essentially with the reverse mortgage being somewhat different than just a straight calculation, the real reason for this calculator is to again capture your information and offer you a loan. The reverse mortgage calculator is not as useful as it may appear.

If you are looking for the best mortgage calculators you'll find that most of the online mortgage lenders provide them as their own lead generation tool, some designed to get you to do business with them. If you're working on calculating your home mortgage loan and need access to the mortgage calculators we've discussed here then you can find links at the bottom of this lesson for the home mortgage calculators suited to your needs.

A lot of time, the lending tree mortgages can be helpful since you can have all of the lenders and brokers providing copies of the good faith estimate so you can compare the total costs using mortgage calculator tools and tips found above and throughout this site.

How Do Mortgages Work?