Hidden benefits of a mortgage calculator

If you're in the market for a house, you've probably used a mortgage calculator to determine your projected monthly payments. But homeowners and buyers can get a lot of additional information out of calculators, if they know how to use them.

If you choose to pay off your loan early, it makes sense to crunch the numbers before you plunk down the extra money. By using the "extra payments" function on your mortgage calculator, you can figure out how much money you'll save by shortening the life of the loan.

To figure out your savings, enter a hypothetical amount into one of the payment categories -- monthly, yearly or one-time. Then, click "Show/Recalculate Amortization Table" to see how much interest you'll pay over the new life of the loan.

Test the ARM

An ARM can mean lower monthly loan payments, but there's a risk if interest rates rise down the road. To measure your tolerance for that risk -- and your ability to make payments in the worst-case scenario -- you'll need to consult your mortgage calculator for the hard data.

To gauge the risk, enter the ARM interest rate, leaving the term as 30 years. Then, compare those payments with what you'd get for a conventional 30-year fixed loan.

If you put less than 20 percent down on your loan, you likely had to buy private mortgage insurance. But once you pass the 20 percent threshold, you can ask your lender to remove that fee from your monthly payments.

How do you know when you've reached 20 percent equity? Plug the original loan amount into the mortgage calculator along with your closing date. Then click "Show/Recalculate Amortization Table," 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. This will show you when you'll reach 20 percent equity.

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