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5 Ways To Use A Mortgage Payment Calculator

Men using a monthly mortgage calculator
Whether you’re hoping to buy or planning to sell, a mortgage calculator can give you some valuable insights.

Before hunting for the perfect home for sale in Houston, TX, the first question you should ask is “How much can I afford?” The answer: Try an online mortgage calculator for a simple, no-pressure way to get a sense of what your monthly mortgage payment could be.

That’s where Trulia’s comprehensive mortgage calculator comes in. It lets you plug in your existing monthly expenses — like car payments and credit card bills — to give you a clearer picture of how it all adds up. But there’s more to this handy tool than just budgeting and payment insights. Here are five questions a monthly mortgage calculator can help answer to make you more savvy about home buying.

1. Should you rent or buy?

There’s more to being a homeowner than just swapping a rent payment for a mortgage payment. You’ll have to consider additional costs like property taxes, and depending on your loan, you also may have to factor in fees like private mortgage insurance (PMI) — all of which can be estimated by a mortgage calculator. It’s a good way to compare the total cost of renting with the realistic costs of buying.

2. Is an adjustable-rate mortgage (ARM) right for you?

One way to keep a mortgage payment down and still get the house with all the bells and whistles is to choose an adjustable-rate mortgage with an interest rate lower than a fixed-rate loan’s. There are some risks involved, however: With an ARM, your payment could spike if the interest rate adjusts. By using Trulia’s adjustable-rate mortgage calculator, you can see how interest rate assumptions can impact your monthly payment, and the total interest paid over the life of a loan with an ARM versus choosing a fixed-rate loan.

3. Can you cancel your PMI payments?

Private mortgage insurance is an additional cost for most buyers who don’t put down at least a 20% down payment. To stop paying this fee every month, you must owe less than 80% of the value of your home. You could qualify by either paying down your loan or seeing enough appreciation in your home to meet the threshold. A monthly mortgage calculator can help compare your home value with the loan amount and determine when you meet the requirements to request cancellation of your PMI payments.

4. Can you afford to pay off your mortgage early?

To find out, use a loan calculator to play around with the numbers. Plug in your original loan amount, interest rate, and date the loan was issued. Then include the amount you think you can add to your current monthly payment to determine how quickly you might be able to own your home outright. Another way to pay off a mortgage early is to convert from a monthly payment to a biweekly payment schedule, paying half your mortgage every two weeks. Seeing those savings can be extra motivation to pick up the pace to an early payoff.

5. Should you refinance?

A lower interest rate is usually a good thing, but depending on the amount you owe and the time remaining in the life of the loan, refinancing may end up costing you more than staying the course. Use Trulia’s refinance calculator to figure in the loan origination and closing fees to help you decide if it’s wise to refi or stay put.

How do you use Trulia’s online mortgage calculator? Share your tips in the comments!