We have built a simple mortgage calculator for you to compare
different loans and to compare buying with renting. Like other
calculators that you find on the Internet, we compute the monthly
payments, the monthly principle, interest and payoff amounts.
However, we have added some extra features to help you decide whether
to buy and which loan to choose.
The first feature is adjustable rate speculation. Suppose you
are interested in a 5/1 ARM. You can specify your estimated
interest rates for years six, seven, etc. You might then find
out that if you want to keep the home for more than 8 years,
you should finance a 30-year fixed mortgage instead of a 5/1 ARM.
Another feature is expense modeling. Using our calculator you
can model tax-deductible and other expenses. You can also
model your rent and investment returns if you decide to rent
instead of buy. The end result is the "break-even" amount
that equals the amount you owe plus the amount you have spent
on the home, adjusted for the rent, taxes, investments and
expenses. For example, suppose you plan to sell your home after
40 months when the calculated break-even amount is $315,000.
At that time your loan carries a prepayment penalty of $5000.
You replace the garage door and the roof, and paint the house
for the total cost $10,000. If your realtor charges 6% and
the transfer tax that you are responsible for is 1.5%,
then you should sell your home at
($315,000 + $5,000 + $10,000)/(100% - 6% - 1.5%) = $360,000.
If you think that you will not be able to command such a price
for your home at that time, you probably should rent.
The result of our calculator is a spreadsheet that you can use
with Microsoft Excel or any other spreadsheet program. You can
graph the numbers or perform further calculations. You can
reformat the rows, columns and print them anyway you like.
The calculator is on the next page. We also provide additional
information on pages 3 and 4 on modeling your expenses accurately and
using the calculator for refinancing.