If you just want to see your monthly payments, you enter just the
loan type and amount. You can leave the other fields as is or blank.
Your spreadsheet will contain the correct numbers for the monthly
payment, principle, interest and payoff balance.
We have built our home ownership calculator to answer two questions
financially. First, should you buy or home or rent an apartment?
Second, which loan is better if you were to sell the home after some
number of years? The answers to these two questions are in the outputs
of the calculator, obviously.
The first question is answered by the "amount over rent" and the
"breakeven amount" columns in the output. The "amount over rent" is
the difference between the monthly expense of owning and renting,
i.e. mortgage minus rent, adjusted for taxes, repairs, rent increase,
rent that you collect from your new home, etc. You can even adjust
for utility bills and such by modeling them as part of the rent or
nondeductible expense. The accumulation of these "amounts over
rent", adjusted for your ROI, plus the payoff amount is the
"breakeven amount." Basically it is the amount of money you would
have in the bank if you had not bought the home. (This amount depends
on the mortgage. Technically, if you do not buy a home, the amount of
money in the bank is the same regardless of the mortgage. That is why
we prefer to calculate the "breakeven amount" and explain it as the
amount you have spent plus the amount you owe given the loan you
have).
The second question of comparing loans is answered by the same "break
even amount" column. When you are ready to sell your home, this
amount, taxes, prepayment penalty and realtor fees determine your
minimum selling price, as we explained in the introduction. However, you might want to look
at the other columns to make sure you can afford each loan. For
example, obviously the sum of your monthly payment, taxes and expenses
must fit under your monthly budget. And if you plan to buy a car, you
must make sure you have enough spare cash. The smaller the difference
is between the breakeven amount and the payoff amount, the more spare
cash you have.
