How to Use a Mortgage Calculator to Save You Thousands

It’s surprising how many people take out a long-term debt like a mortgage and then don’t think much more about it than just making the monthly repayments.

In fact, when most people think about using a mortgage calculator, they only consider trying to work out how much they’ll be paying each month. They don’t tend to work out any other aspects of a large loan that will take them the better part of their working lives to repay.

The calculation behind these seemingly-simple programs is an amortization table. When banks determine how much your monthly payment will be, they use amortization to factor in their interest costs as well as a small portion of each payment to be paid off your loan balance.

If you’ve ever looked at your mortgage statement, you’ll notice that you pay a lot of money in each month, but only a little comes off the balance. The key to paying off your mortgage quickly is to reduce the outstanding balance even by a little bit.

The monthly interest figure you see on your mortgage statements each month is actually added up and calculated daily on the balance you owe. This means that if you can even reduce your mortgage principle by as little as $10 on top of your regular monthly payments, you’re cutting down the amount of interest you pay each time you do this.

Using a mortgage calculator that has an amortization schedule available can show you the effect these small payments can have on the total amount of interest you pay on your mortgage over the whole loan term. It adds up to quite a lot of money!

Another great way to use a mortgage calculator to save you money is to see what effect paying a lower interest rate can have on your monthly repayments and also on your total interest costs.

One of the most powerful mortgage calculators available is a Renting vs. Buying calculator. Many people struggle to understand the complex terms used by banks in their mortgages. They begin to feel that renting might be the cheaper option for them.

What a mortgage calculator can show you is that paying off a mortgage is often cheaper than renting. After all, every time you make a repayment on your mortgage, you’re paying off a piece of an asset that you own.

When you rent, your landlord can continue to increase your rent each year. Imagine how high your rent payments could be after 10 years. When your landlord decides to sell, you have to find somewhere new to live and the money you’ve paid is gone forever.

There are many benefits to taking a moment to play with your own numbers in a mortgage calculator. Try it with your own figures and see what you can learn.

You may want to check out my other guide on commercial mortgage lenders and reverse mortgage calculator

Mortgage Calculator Com

mortgage calculator

How to Use a Mortgage Calculator to Save You Thousands

Related Articles: