Mortgage Mavin

Find the right mortgage


Describe the Analysis
Main goal:
  ?  
Options:
Include property tax
Include prepayments
Include tax deductions
  ?  
Describe the Loan
 
Mortgage type:
  ?  
Loan term (in years):
  ?  
Loan amount ($):
  ?  
Interest rate (%):
  ?  
Months before note must be paid:
  ?  
Describe the Rate Adjustment Rules
Months before first rate adjustment:
  ?  
Periodic rate cap (%):
  ?  
Maximum lifetime interest rate (%):
  ?  
Number of rate adjustments:
  ?  
Months between rate adjustments:
  ?  
Ending interest rate (%):
  ?  
Cost to convert ($):
  ?  
Months before fixed rate begins:
  ?  
Describe the Costs Paid at Closing
Down payment ($):
  ?  
Points (%):
  ?  
Other costs and fees ($):
  ?  
Describe the Prepayment Strategy
Number of prepayments per year:
  ?  
Amount per prepayment ($):
  ?  
Enter Tax and Insurance Info
Annual property tax ($):
  ?  
Annual hazard insurance ($):
  ?  
Annual mortgage insurance ($):
  ?  
Appraised value of home ($):
  ?  
Income tax rate (%):
 
  ?  



Summary Report



To create a report, enter data into the Mortgage Calculator and click the Calculate button.

Frequently-Asked Questions


Instructions: To find the answer to a frequently-asked question, simply click on the question.

See also:   Mortgage Case Studies


How do I use the mortgage calculator?

The Mortgage Mavin calculator is accessible from the Calculator link on the left side of every Mortgage Mavin web page. Working with the calculator involves a simple, three-step process:

  • Describe the analysis. Choose your main goal and select options - produce an amortization schedule, include taxes and insurance, assess the prepayment effects, and compute tax savings.

  • Enter data. Based on the options you select, the calculator will prompt you for inputs (mortgage type, interest rate, loan amount, loan term, etc.) needed to conduct the analysis.

  • Report results. After you provide the data requested, click the Calculate button. The calculator displays a summary report that clearly presents key findings, based on data you entered.

Which goal should I choose for my analysis?

The mortgage calculator gives you a choice of six different goals. Here is what you get with each option.

  • Find monthly mortgage. Select this goal when you are only interested in the monthly mortgage payment. Based on your input (loan amount, loan term, interest rate), the calculator will report monthly payment (principal and interest). If you wish, you can include the effect of other factors (e.g., property tax, hazard insurance, mortgage insurance, and prepayments) on the monthly payment. And finally, you can create an amortization schedule that tracks the amount paid and the amount due over the life of the mortgage.

  • Find total mortgage cost. This option provides everything that you get with the monthly mortgage option (described above). In addition, you get more detail on mortgage cost (e.g., closing costs, points, settlement fees); and you can evaluate the effect of tax deductions for points and interest.

  • Find savings from prepayment. Use this option to understand prepayment effects - how much quicker you can pay off your mortgage and how much money you can save over the life of your mortgage. In addition, this option provides everything that you get with the monthly mortgage option (described above).

  • Compare two mortgages. This option allows you to easily compare two mortgages - interest expense, settlement costs, private mortgage insurance, loan duration, etc. The final report shows total cost over the lifetime of each mortgage, with and without tax deductions. An amortization report allows you to compare total cost for each mortgage at any point in time. And finally, this option computes monthly mortgage payments for each mortgage.

  • Evaluate refinancing plan. This option allows you to easily assess the costs and benefits of refinancing your current mortgage. It compares loan duration and cost, with and without refinancing. And it shows how long it will take for refinancing savings to pay for refinancing costs.

  • Display amortization table. This option allows you to easily generate an amortization table (aka, amortization chart, amortization schedule) for ten types of mortgage. The amortization table shows how much of each mortgage payment goes toward principal, how much goes toward interest, and the amount required to retire the loan in each payment period. Additionally, for each payment period, this amortization table shows the total loan cost (principal, interest, closing costs, etc.) if the loan is paid off in that payment period.

What kinds of problems can the mortgage calculator handle?

This home mortgage calculator is versatile. Use it to answer common questions about home loans, such as:

What kinds of mortgages can the mortgage calculator handle?

This mortgage calculator works with many kinds of mortgages - four kinds of fixed-rate mortgage and six kinds of adjustable-rate mortgage, as shown in the table below.

Fixed-Rate Mortgages Adjustable-Rate Mortgages
Traditional fixed-rate
Biweekly mortgage
Balloon loan
Interest-only loan
Traditional adjustable-rate mortgage
Convertible ARM
Two-step mortgage
Balloon ARM
Interest-only ARM
Graduated loan

To specify the mortgage that you want to work with, select an entry from the "Mortgage Type" dropdown box. The current entry is "Biweekly Fixed-Rate", so the mortgage calculator will generate an amortization table for a Biweekly Fixed-Rate.

What are the meanings of the various financial terms used by the mortgage calculator?

For help with any financial term used by the mortgage calculator, click the Help Icon ,   ?   , to its right.

If you need additional help, check the Mortgage Mavin Glossary. To access the glossary, click the Glossary hyperlink that appears on the left side of every Mortgage Mavin web page.

What is the history of the mortgage calculator?

For most of the 20th century, home buyers, lending institutions, and real estate professionals relied on dense, hard-to-read tables to answer simple questions about mortgage properties (payment amount, loan duration, interest expense, etc.). Obtaining information was tedious, and human error was rampant.

Toward the end of the century, handheld financial calculators became the tool of choice. This was an improvement, but there were still problems. Using the calculators required training, interpreting the results required experience, and there was a price. Handheld calculators are not free.

Today, in the 21st century, everything is better. No more hard-to-read tables. No need for costly, hard-to-use handheld calculators. Mortgage Mavin's online mortgage calculator provides the answers you need - fast, easy, and free. The information you need is just a mouse click away.

Sample Problems


This section shows how to use the mortgage calculator to answer a common mortgage question. For more sample problems, see the Mortgage Mavin case studies.

Problem

Bob needs a mortgage loan of $250,000. He is considering a fixed-rate balloon loan. Mortgage payments are based on a 30-year loan term, with a starting interest rate of 6.5%. The balloon note term is 5 years. This means that Bob will need to pay off the unpaid loan balance in full, after 5 years.

In 5 years, when Bob pays off the loan, what will the balance be?

Solution:

As part of its summary report, the mortgage calculator generates an amortization table, which shows the principal and interest paid in every payment period. However, the Mortgage Mavin calculator provides some "extra" information when the main goal is "Find monthly mortgage". In particular, it shows the remaining balance after every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the balance at the 5-year mark. Here's how.

First, Choose "Find monthly mortgage" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". This will ensure that the summary report generates an amortization schedule that shows the loan balance after 5 years (i.e., after month 60).

The calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Months before note must be paid:

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows the principal due after each payment period. By examining month 60 of the amortization table, you see that the remaining balance after 5 years (60 months) is $234,026.75. Thus, the balloon payment due after 5 years (60 months) is $234,026.75.


Problem

Ted needs a mortgage loan of $200,000. He has chosen a 30-year fixed-rate loan, with a starting interest rate of 6.5%.

What will Ted's monthly payment be for principal and interest?

Solution:

First, Choose "Find monthly mortgage" from the Main Goal dropdown box of the Mortgage Mavin calculator. And in the Options section, check "Include amortization schedule".

Based on these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:

After you press the Calculate button, the mortgage calculator generates a summary report, which shows that Ted will pay $1264.15 each month for principal and interest.

In addition, the amortization table shows the contribution of principal and interest in each payment period. For example, in the first payment period, Ted pays $180.82 toward principal and $1,083.33 toward interest.

Problem

Alice is buying a new home for $220,000. She will make a down payment of $20,000 and get a $200,000 fixed-rate mortgage. The mortgage is a 30-year loan with an 8 percent interest rate. At closing, she will pay one discount point and $3,000 in other costs.

Suppose that the fair market value of Alice's home is $220,000, and the annual cost of private mortgage insurance is $1,800 per year.

What will be the total mortgage cost over the 30-year life of the loan? Suppose Alice sells her home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table. Most amortization tables show just the principal and interest paid in every payment period. However, the amortization table produced by this calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule" and check "Include mortgage insurance". This tells the calculator to produce an amortization table that accounts for private mortgage insurance as part of the total cost.

Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):
Enter Insurance Info
Annual mortgage insurance ($):
Appraised value of home ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Alice's total mortgage cost over the 30-year life of this fixed-rate mortgage will be $571,148.20. The amortization table also shows the total cost after 10 years. If Alice sells her home (and pays off the mortgage) after 10 years, her total cost will be $394,402.23.

Problem

Betty is buying a new home for $220,000. She will make a down payment of $20,000 and get a $200,000 biweekly fixed-rate mortgage. The mortgage is a 30-year loan with an 8 percent interest rate. At closing, she will pay one discount point and $3,000 in other costs.

What will be the total mortgage cost over the 30-year life of the loan? Suppose Betty sells her home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table. Most amortization tables show just the principal and interest paid in every payment period. However, the amortization table produced by this calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule" and check "Include mortgage insurance". This tells the calculator to produce an amortization table that accounts for private mortgage insurance as part of the total cost.

Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):
Enter Insurance Info
Annual mortgage insurance ($):
Appraised value of home ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Betty's total mortgage cost over the 30-year life of this biweekly fixed-rate loan will be $570,876.06. The amortization table also shows the total cost after 10 years. If Betty sells her home (and pays off the mortgage) after 10 years, her total cost will be $394,321.43.

Problem

Carla is buying a new home for $220,000. She will make a down payment of $20,000 and get a $200,000 fixed-rate balloon loan. Monthly mortgage payments are based on a 30-year loan with an 8 percent interest rate.

The balloon term is 60 months. This means that Carla will have to pay off the loan balance in 60 months (5 years).

At closing, Carla will pay one discount point and $3,000 in other costs.

After 5 years, when Carla pays off the loan, what will be the loan balance? What will be the total cost of the mortgage?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates many outputs, including an amortization table. In addition to the principal and interest paid in every payment period, this amortization table shows the total cost of the mortgage and the loan balance in every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost and loan balance after 5 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Months before note must be paid:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that the balance remaining is $190,138.92, and the total cost of the mortgage is $303,191.32.

The mortgage calculator also produces a table that shows the components of total mortgage cost for this fixed-rate balloon loan. Relevant portions of that table appear below.

Mortgage attributes Values
Principal due: $190,138.92
Principal paid: $9,861.08
Total interest expense: $78,191.32
Down payment: $20,000
Points: $2,000
Other loan costs: $3,000
Total mortgage cost: $303,191.32

Problem

David is buying a new home for $220,000. He will make a down payment of $20,000 and get a $200,000 fixed-rate interest-only loan, with an 8 percent interest rate.

At closing, David will pay one discount point and $3,000 in other costs. The mortgage requires David to pay off the loan balance in 60 months (5 years).

After 5 years, when David pays off the loan, what will be the loan balance? What will be the total cost of the mortgage?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates many outputs, including an amortization table. In addition to the principal and interest paid in every payment period, this amortization table shows the total cost of the mortgage and the loan balance in every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost and loan balance after 5 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan amount ($):
Interest rate:
Months before note must be paid:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the interest-only mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that the balance remaining is $200,000, and the total cost of the mortgage is $304,999.80.

The mortgage calculator also produces a table that shows the components of total mortgage cost for this fixed-rate interest-only loan. Relevant portions of that table appear below.

Mortgage attributes Values
Principal due: $200,000
Principal paid: $0
Total interest expense: $79,999.80
Down payment: $20,000
Points: $2,000
Other loan costs: $3,000
Total mortgage cost: $304,999.80

Problem

Esther is buying a new home for $220,000. She will make a down payment of $20,000 and get a $200,000 adjustable-rate mortgage (ARM).

At closing, Esther will pay one discount point and $3,000 in other costs. The loan details are described below.

Basic features Rate adjustment features
Mortgage type: Adjustable-rate mortgage First rate adjustment at: 60 months
Starting interest rate: 6 percent Periodic rate cap: 2 percent
Loan amount: $200,000 Maximum lifetime rate cap: 12 percent
Loan term: 30 years Months between adjustments: 12 months

What will be the total mortgage cost over the 30-year life of the loan? Suppose Esther sells her home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table. Most amortization tables show just the principal and interest paid in every payment period. However, the amortization table produced by this calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Starting interest rate:
Describe the Rate Adjustment Rules
Months before first rate adjustment:
Periodic rate cap (%):
Maximum lifetime interest rate (%):
Months between rate adjustments:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Esther's total mortgage cost over the 30-year life of the loan will be $733,741.78. The amortization table also shows the total cost after 10 years. If Esther sells her home (and pays off the mortgage) after 10 years, her total cost will be $431,718.74.

Note: This analysis assumes that the adjustable-rate mortgage "adjusts" to its maximum interest rate of 12 percent - a worst-case scenario. This might overstate the true lifetime cost of the adjustable-rate mortgage. An alternative analysis would be to employ a best-guess scenario; i.e., guess the average interest rate over the life of the adjustable-rate mortgage and assume that the maximum interest rate equals the hypothesized average interest rate. For more info on this topic, see Adjustable-Rate Mortgages: Dealing With Uncertainty.

Problem

Evelyn is buying a new home for $220,000. To pay for the home, she will make a down payment of $20,000 and get a $200,000 convertible ARM. At closing, she will pay one discount point and $3,000 in other costs. The loan details are described below.

Basic features Rate adjustment features
Mortgage type: Convertible ARM Duration of adjustable rate: 60 months
Starting interest rate: 6 percent Periodic rate cap: 2 percent
Loan amount: $200,000 Lifetime rate cap: 12 percent
Loan term: 30 years Between adjustments: 12 months
Final fixed interest rate: 8 percent
Cost to convert: $1,000

Suppose that the fair market value of Evelyn's home is $220,000, and the annual cost of private mortgage insurance is $1,800 per year. Suppose also that Evelyn converts to a fixed interest rate of 8 percent after 60 months.

What will be the total mortgage cost over the 30-year life of the loan? Suppose Evelyn sells her home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table. Most amortization tables show just the principal and interest paid in every payment period. However, the amortization table produced by this calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule" and check "Include mortgage insurance". This tells the calculator to produce an amortization table that accounts for private mortgage insurance as part of the total cost..

Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Describe the Rate Adjustment Rules
Periodic rate cap (%):
Maximum lifetime interest rate (%):
Months between rate adjustments:
Ending interest rate (%):
Cost to convert ($):
Months before fixed rate begins:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):
Enter Insurance Info
Annual mortgage insurance ($):
Appraised value of home ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Mary's total mortgage cost over the 30-year life of this convertible ARM will be $601,179.54. The amortization table also shows the total cost after 10 years. If Mary sells her home (and pays off the mortgage) after 10 years, her total cost will be $420,353.08.

Problem

Felix is buying a new home for $220,000. He will make a down payment of $20,000 and get a $200,000 two-step mortgage. The mortgage is a 30-year loan with a starting interest rate of 6 percent. At closing, he will pay one discount point and $3,000 in other costs. The remaining loan details are shown below.

Basic features Rate adjustment features
Mortgage type: Two-step mortgage Months before rate adjustment: 60 months
Starting interest rate: 6 percent Ending interest rate: 8 percent
Loan amount: $200,000
Loan term: 30 years

What will be the total mortgage cost over the 30-year life of the loan? Suppose Felix sells his home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table. Most amortization tables show just the principal and interest paid in every payment period. However, the amortization table produced by this calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Starting interest rate:
Describe the Rate Adjustment Rules
Months before rate adjustment:
Ending interest rate (%):
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Felix's total mortgage cost over the 30-year life of this two-step mortgage will be $527,865.67. The amortization table also shows the total cost after 10 years. If Felix sells his home (and pays off the mortgage) after 10 years, his total cost will be $354,860.58.

Problem

George is buying a new home for $220,000. He will make a down payment of $20,000 and get a $200,000 adjustable-rate balloon loan. The mortgage is a 30-year loan with a starting interest rate of 6 percent. The loan details are described below.

Basic features Rate adjustment features
Mortgage type: Balloon ARM Months before first rate adjustment: 12 months
Starting interest rate: 6 percent Periodic rate cap: 2 percent
Loan amount: $200,000 Maximum interest rate: 12 percent
Loan term: 30 years Months between adjustments: 12 months
Months before note must be paid: 60 months

At closing, George will pay one discount point and $3,000 in other costs.

After 5 years, when George pays off the loan, what will be the loan balance? What will be the total cost of the mortgage?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates many outputs, including an amortization table. In addition to the principal and interest paid in every payment period, this amortization table shows the total cost of the mortgage and the loan balance in every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost and loan balance after 5 years (60 months). Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Starting interest rate:
Months before note must be paid:
Describe the Rate Adjustment Rules
Months before first rate adjustment:
Periodic rate cap (%):
Maximum lifetime interest rate (%):
Months between rate adjustments:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that the balance remaining is $192,224.29, and the total cost of the mortgage is $315,901.13.

The mortgage calculator also produces a table that shows the components of total mortgage cost for this adjustable-rate balloon loan. Relevant portions of that table appear below.

Mortgage attributes Values
Principal due: $192,224.29
Principal paid: $7,775.71
Total interest expense: $93,601.13
Down payment: $20,000
Points: $2,000
Other loan costs: $3,000
Total mortgage cost: $315,901.13

Note: This analysis assumes that the adjustable-rate mortgage "adjusts" to its maximum interest rate of 12 percent - a worst-case scenario. This might overstate the true lifetime cost of the adjustable-rate mortgage. An alternative analysis would be to employ a best-guess scenario; i.e., guess the average interest rate over the 5-year life of this adjustable-rate balloon mortgage and assume that the maximum interest rate equals the hypothesized average interest rate. For more info on this topic, see Adjustable-Rate Mortgages: Dealing With Uncertainty.

Problem

Herb is buying a new home for $220,000. He will make a down payment of $20,000 and get a $200,000 adjustable-rate interest-only mortgage, with a starting interest rate of 6 percent. The loan details are described below.

Basic features Rate adjustment features
Mortgage type: Interest-Only ARM Months before first rate adjustment: 12 months
Starting interest rate: 6 percent Periodic rate cap: 2 percent
Loan amount: $200,000 Maximum interest rate: 12 percent
Months before note must be paid: 60 months Months between adjustments: 12 months

At closing, Herb will pay one discount point and $3,000 in other costs.

After 5 years, when Herb pays off the loan, what will be the loan balance? What will be the total cost of the mortgage?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates many outputs, including an amortization table. In addition to the principal and interest paid in every payment period, this amortization table shows the total cost of the mortgage and the loan balance in every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost and loan balance after 5 years (60 months). Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule". Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan amount ($):
Starting interest rate:
Months before note must be paid:
Describe the Rate Adjustment Rules
Months before first rate adjustment:
Periodic rate cap (%):
Maximum lifetime interest rate (%):
Months between rate adjustments:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that the balance remaining is $200,000, and the total cost of the mortgage is $321,000.

The mortgage calculator also produces a table that shows the components of total mortgage cost for this adjustable-rate interest-only mortgage. Relevant portions of that table appear below.

Mortgage attributes Values
Principal due: $200,000
Principal paid: $0
Total interest expense: $96,000,000
Down payment: $20,000
Points: $2,000
Other loan costs: $3,000
Total mortgage cost: $321,000

Note: This analysis assumes that the adjustable-rate mortgage "adjusts" to its maximum interest rate of 12 percent - a worst-case scenario. This might overstate the true lifetime cost of the adjustable-rate mortgage. An alternative analysis would be to employ a best-guess scenario; i.e., guess the average interest rate over the 5-year life of this adjustable-rate interest-only mortgage and assume that the maximum interest rate equals the hypothesized average interest rate. For more info on this topic, see Adjustable-Rate Mortgages: Dealing With Uncertainty.

Problem

Irving is buying a new home for $220,000. To pay for the home, he will make a down payment of $20,000 and get a $200,000 graduated payment loan. The starting interest rate for this loan is 6 percent. Every 12 months, the interest increases by 1 percentage point, until the interest rate reaches 9 percent. The loan details are described below.

Basic features Rate adjustment features
Mortgage type: Graduated payment loan Number of rate adjustments: 3
Starting interest rate: 6 percent Months between adjustments: 12
Loan amount: $200,000 Ending interest rate: 9 percent
Loan term: 30 years

At closing, Irving will pay one discount point and $3,000 in other costs.

Suppose that the fair market value of Irving's home is $220,000, and the annual cost of private mortgage insurance (PMI) is $1,800 per year. What will be the total mortgage cost over the 30-year life of the loan? Suppose Irving sells his home after 10 years. What will be the total cost of the mortgage after 10 years?

Solution:

As part of its summary report, the Total Cost Mortgage Calculator generates an amortization table, which shows the principal and interest paid in every payment period. However, unlike typical amortization tables, the amortization table produced by the Total Cost Calculator also shows the total cost of the mortgage at every payment period. Therefore, to solve this problem, you just need to produce an amortization table and check the total cost after 10 years and after 30 years. Here's how.

First, Choose "Find total mortgage cost" from the Main Goal dropdown box. And in the Options section, check "Show amortization schedule" and check "Include mortgage insurance". This tells the calculator to produce an amortization table that accounts for private mortgage insurance as part of the total cost.

Given these settings, the calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Starting interest rate:
Describe the Rate Adjustment Rules
Number of rate adjustments:
Months between rate adjustments:
Ending interest rate (%):
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):
Enter Tax and Insurance Info
Annual mortgage insurance ($):
Appraised value of home ($):

After you press the Calculate button, the mortgage calculator generates a summary report that includes an amortization table. The amortization table shows that Irving's total mortgage cost over the 30-year life of the loan will be $468,555.79. The amortization table also shows the total cost after 10 years. If Irving sells his home (and pays off the mortgage) after 10 years, his total cost will be $346,920.79.

Problem

Nick is getting a fixed-rate mortgage. The interest rate is 9%, the loan term is 30 years, and the loan amount is $250,000.

Suppose Nick made an "extra" payment of $100 each month. How long would it take to pay off the mortgage? How much would Nick save?

Solution:

Use the Prepayment Mortgage Calculator to solve this problem. First, describe the problem. Choose "Find savings from prepayment" from the Main Goal dropdown box.

The calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Describe the Prepayment Strategy
Number of prepayments per year:
Amount per prepayment ($):

Then, click the Calculate button. The summary report shows a Prepayment Analysis, which is reproduced below. Prepayment shortens the loan term from 30 years to 24.42 years; and it reduces the mortgage cost by $105,551.58.

Mortgage attributes Without prepayment With prepayment*
Number of prepayments per year 0 12
Amount per prepayment
$0 $100
Loan duration 30 years 24.42 years
Interest expense $474,140.88 $368,589.30
Savings . . . $105,551.58

Note: This analysis slightly underestimates the benefits of prepayment, because it doesn't account for possible benefits from reduced property mortgage insurance (PMI). To account for the benefits of reduced PMI, check the "Include mortgage insurance" checkbox and repeat the analysis.

Problem

Clark has $15,000, but he needs $500,000 to buy his dream home. He is considering two options.

  • He can get a 30-year, fixed-rate loan for $500,000. The interest rate would be 7.5%, and he would use his $15,000 to pay 3 discount points.
  • He can use his $15,000 as a down payment on the home, and get a 15-year, fixed-rate loan for $485,000 to cover the rest. The interest rate would be 8%, but there would be no discount points.

If Clark stays in his home for the full 30 years of the mortgage, which loan should he choose? If Clark sells his home after 5 years, which loan should he choose? (To keep things simple, assume that there are no closing costs.)

Solution:

Use the Mortgage Comparison Calculator to solve this problem. First, describe the analysis.

  • Choose "Compare two mortgages" from the Main Goal dropdown box.
  • Under Loan 1, choose "Fixed-Rate Mortgage" as the mortgage type.
  • Under Loan 2, choose "Fixed-Rate Mortgage" as the mortgage type.
  • Be sure the "Show amortization schedule" checkbox is checked.

The calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
 
Loan 1
Loan 2
Mortgage type:
Loan term (in years):
Loan amount ($):
Interest rate:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

After you press the Calculate button, the Compare Two Mortgages Calculator generates a summary report that includes an amortization table. The amortization table shows the total mortgage cost for each loan, during the life of the loan. The table below shows results after 5 years (month 60) and after 30 years (month 360). If Clark sells his home after 5 years, Loan 2 is the best choice. However, if Clark keeps his home for the life of the mortgage (30 years), Loan 1 is the best choice.

Month Loan 1: Total mortgage cost Loan 2: Total mortgage cost
60 $697,851 $689,614
360 $1,273,579 $1,296,140

Problem

Fred has an adjustable-rate mortgage. There are 15 years left on the mortgage, and unpaid principal is $150,000. The mortgage has a periodic rate cap of 1 percent and a Lifetime rate cap of 12 percent. The current interest rate is 6 percent. The next rate adjustment will occur in 12 months, and subsequent rate adjustments can occur each 12 months.

Fred can refinance the mortgage with a 15-year, fixed-rate mortgage. The interest rate for the fixed-rate mortgage would be 8 percent. To get the new mortgage, Fred will need to pay $3000 in closing costs. The new mortgage does not require a down payment or points.

Would Fred be better off to keep the existing mortgage, or should he refinance?

Solution:

Use the Refinance Mortgage Calculator to solve this problem. First, describe the problem.

  • Choose "Evaluate refinancing plan" from the Main Goal dropdown box.
  • Make sure that the "Show amortization schedule" checkbox is checked.
  • Under "Current Loan", in the "Mortgage type" dropdown list box, choose "Adjustable-Rate Mortgage".
  • Under "New Loan", in the "Mortgage type" dropdown list box, choose "Fixed-Rate Mortgage".

The calculator will prompt you for the data it needs. Provide the data, as shown below.

Describe the Analysis
Main goal:
 
Options:
Show amortization schedule
Include mortgage insurance
Include hazard insurance
Include property tax
Include prepayments
Include tax deductions
Describe the Loan
 
Current Loan
New Loan
Mortgage type:
Loan term (in years):
Loan amount ($):
Starting interest rate:
Describe the Rate Adjustment Rules
Months before first rate adjustment:
Periodic rate cap (%):
Maximum lifetime interest rate (%):
Months between rate adjustments:
Describe the Costs Paid at Closing
Down payment ($):
Points (%):
Other costs and fees ($):

Then, click the Calculate button. The amortization report shows details for each month of the loan.

If you input the data and read the amortization report, here is what you will find. The "breakeven" point for refinancing occurs in the 74th month. Before the 74th month, Fred would be better off NOT refinancing. However, after the 74th month, Fred would save money by refinancing. If he kept the home for the full mortgage term (15 years), Fred would save $26,024 by refinancing.

In short, if Fred is going to stay in the house for at least 74 more months, he should refinance. And the longer Fred lives in his house, the more he will save by refinancing.

Note: This analysis assumes that the adjustable-rate mortgage "adjusts" to its maximum interest rate of 12 percent - a worst-case scenario. This might overstate the true cost of the adjustable-rate mortgage. An alternative analysis would be to employ a best-guess scenario; i.e., guess the average interest rate over the life of the adjustable-rate mortgage and assume that the maximum interest rate equals the hypothesized average interest rate. For more info on this topic, see Adjustable-Rate Mortgages: Dealing With Uncertainty.