mortgage

3 ways to use a mortgage calculator

Most people use a mortgage calculator to estimate the payment on a new mortgage, but it can be used for other purposes, too. Here are some alternative uses for Bankrate's calculator.

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Bankrate can help you find the lowest available mortgage rate.

1. Planning to pay off your mortgage early.

By the time a 30-year fixed-rate mortgage is paid off, the typical mortgage holder will have made total interest payments significantly larger than the original principal on the loan.

Use the "Extra payments" functionality of Bankrate's mortgage calculator to find out how you can shorten your term and net big savings by paying extra money toward your loan's principal each month, every year or even just one time.

To calculate the savings, enter a hypothetical amount into one of the payment categories (monthly, yearly or one-time) and then click "Show/Recalculate Amortization Table" to see how much interest you'll end up paying and your new payoff date.

2. Decide if an ARM is worth the risk.

The lower initial interest rate of an adjustable-rate mortgage, or ARM, can be tempting. But while an ARM may be appropriate for some borrowers, others may find that the lower initial interest rate won't cut their monthly payments as much as they think.

To get an idea of how much you'll really save initially, try entering the ARM interest rate into the mortgage calculator, leaving the term as 30 years. Then, compare those payments to the payments you get when you enter the rate for a conventional 30-year fixed mortgage. Doing so may confirm your initial hopes about the benefits of an ARM -- or give you a reality check about whether the potential plusses of an ARM really outweigh the risks.

3. Find out when to get rid of private mortgage insurance.

You can use the mortgage calculator to determine when you'll have 20 percent equity in your home. This percentage is the magic number for requesting that a lender wave private mortgage insurance requirement.

Simply enter in the original amount of your mortgage and the date you closed, and click "Show/Recalculate Amortization Table." Then, multiply your original mortgage amount by 0.8 and match the result to the closest number on the far-right column of the amortization table to find out when you'll reach 20 percent equity.

 How to use the mortgage calculator.

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