Mortgage Calculator

Today more and more borrowers opt for No Money Down Purchases. And more and more lenders are creating programs specifically for this purpose.

A No Money Down purchase is where a borrower receives 100% financing for the purchase of a home. This can be in one loan, or in a combination of two loans (a first mortgage and second mortgage or HELOC) so the borrower does not have to make any down payment.

Some things to know about No Money Down Purchases:

* Many people opt to purchase with no money down even though they have adequate reserves to cover a down payment if they chose to do so. With interest rates as low as they have been, it often makes more sense to borrower the money at a low rate, and you use cash to pay off other bills or spend on something with a higher return. Also, interest on a mortgage is generally tax deductible.

* Even though you are not making any down payment, there still will probably be closing costs that you may be obligated to pay. To avoid paying some or all of the closing costs, you may want to consider asking for seller concessions. If seller concessions are allowed, the person selling you the home can pay for some or all of your closing costs. With concessions and the right loan program, it may be possible to go to the closing table and buy your home with no money out of your pocket!

* A conventional second mortgage or Home Equity Line of Credit (HELOC) can be used along with a first mortgage to potentially reduce total monthly mortgage payments (as opposed to one loan for 100%) and prevent the need for mortgage insurance.

This summer, Bill Wagar makes his second trip to France. Only this time, the World War II veteran is traveling on his own dime.

Wagar, 82, is paying for the trip with a reverse mortgage, a loan available to people age 62 and older that converts their home equity into cash. Wagar, a recent widower and General Motors Corp. retiree, said he plans on retracing the steps he took on Omaha Beach while serving in the Army.

"I've been retired for 20 years and living on a fixed income. I do all right, but I wanted to do some things I didn't have the cash to do," the Livonia man said. "I don't plan on remarrying, and I have no plans to move out. For me, this works out well."

Be careful when responding to advertisements about bill consolidation. If they are about home mortgages, refinancing or equity lines of credit, that's one thing. But they actually may be about bankruptcy. Don't get involved with bankruptcy unless you understand what it means and have evaluated all your other options.

The Federal Trade Commission (FTC) cautions consumers to read between the lines when faced with ads in newspapers, magazines or even telephone directories that say:

“Consolidate your bills into one monthly payment without borrowing.�

“STOP credit harassment, foreclosures, repossessions, tax levies and garnishments,�

“Keep Your Property.�

“Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!�

You’ll find out later that such phrases often involve bankruptcy proceedings, which can hurt your credit and cost you attorneys’ fees.

If you’re having trouble paying your bills, consider these possibilities before considering filing for bankruptcy:

* Talk with your creditors. They may be willing to work out a modified payment plan.
* Contact a credit counseling service. These organizations work with you and your creditors to develop debt repayment plans. Such plans require you to deposit money each month with the counseling service. The service then pays your creditors. Some nonprofit organizations charge little or nothing for their services.
* Carefully consider a second mortgage or home equity line of credit. While these loans may allow you to consolidate your debt, they also require your home as collateral.

This blogger says that continued increases in short-term interest rates may lead to an inverted yield curve, or a condition where short-term interest rates are higher than long-term interest rates. No guarantees which way the yield curves will go this year, but an inverse yield curve is usually not a good sign for the economy. But it means home mortgage rates would remain historically low.

[S]hort-term rates (represented here by 1-year Treasury yields) have indeed been moving up since the Fed starting raising their target rate. In fact, they were moving up before the Fed's decision as the market was probably anticipating the rate hikes. However, long-term rates (10-year Treasury yields in my example) have not shown the same movement. Instead, the have held steady and even fallen slightly!

Due to these trends the "yield spread," that is, the difference between the two rates, has been falling sharply. It has dropped by almost 2 full percentage points since the beginning of 2004.

Now at this point I should stress that there is nothing to guarantee that this trend will continue. But if it does continue, it's entirely possible that by the end of the year (or shortly thereafter) we could have that strange economic phenomenon known as an "inverted yield curve" (or maybe just a flat one).

An inverted yield curve is a curious situation because investors are earning more money on short-term investments than long-term ones, the opposite of what we'd expect. Under "normal" conditions, investors will demand higher rates of return in exchange for giving up their money for a longer period of time.

As far as leading indicators for recessions go, there isn't anything much better than the IYC. The chart I've constructed below (click it for a better image) shows just the spread between 10-year and 1-year Treasury yields. Those years were selected as they were the longest weekly time-series I could find, going back to 1953 (data from the Federal Reserve).

Good news for homeowners, not so good news for home buyers.

PMI Mortgage Insurance Co., a subsidiary of The PMI Group, Inc., has released its winter 2005 Risk Index indicating a decrease in the probability of an overall house price decline since the autumn of 2004. PMI's Risk Index represents PMI's view on geographic house-price risk and the probability of a regional home-price decline as measured over the next two years.

Based on PMI's Risk Index model, as of January 2005, the average risk value of the 50 largest Metropolitan Statistical Areas (MSAs) is 161. This implies that on average, there exists a 16.1 percent probability of an overall house price decline, as measured within the next two years and across the 50 largest housing markets.

The winter 2005 average risk value decreased sequentially, quarter-over-quarter, by 13.4 percent. As of autumn 2004, PMI Risk Index data showed that the average risk value of the 50 largest MSAs was 186, which implied an 18.6 percent probability of an overall house price decline, measured within the next two years and across the 50 largest housing markets.

Analysts at PMI have attributed the average decrease to improving nationwide economic conditions indicated by generally lower regional unemployment rates and increasing (or less negative) job creation. Eight of the nine MSAs ranked at the top of PMI's Risk Index, but did experience a substantial increase in risk. For these markets, another quarter of record home price appreciation has further dented home affordability even at mortgage rates close to historic lows. As affordability for these MSAs drifts lower, this signals a further misalignment of home prices with long-term economic fundamentals causing the probability of a two-year price decline to escalate.

Rates may go back down again next week as a result of lower consumer inflation, but they nudged up this week.

Long-term mortgage rates, while still historically cheap, rose for a second consecutive week.

Freddie Mac said the average 30-year fixed-rate mortgage rose to 5.69 percent, up from last week's average 5.62 percent. Shorter-term rates also rose. One-year adjustable-rate mortgages averaged 4.16 percent this week.

"Mortgage rates rose for the second week in a row on concerns about a pickup in inflation showing up in raw materials," said Freddie Mac chief economist Frank Nothaft. "However, a broader measure of inflation, the consumer price index, posted a less-than-expected rise in inflation, causing bond yields to fall."

Second mortgages are a good financial instrument for homeowners considering debt consolidation or home improvements. Here's a short explanation of a second mortgage. Click on the link for the entire explanation.

A second mortgage is a loan that is secured by the equity in your home. When you obtain a second mortgage loan the lender will place a lien on your house. This lien will be recorded in 2nd position after your primary or 1st mortgage lender's lien, hence the term second mortgage.

A second mortgage is also sometimes referred to as a home equity loan. There is no difference between a home equity loan and a second mortgage. These are just two different terms for the same subject.

A second mortgage can either be a fixed-rate loan or an adjustable-rate credit line. Interest rates and loan program terms will vary from lender to lender so it is important to shop around and compare before committing to any one offer.

Sub-prime lendors sometimes target financially strapped home owners for predatory mortgage refinancing, a practice in which homeowners are pressured to refinance their mortgage with a loan that has excessive points, fees, penalties of interest rates. Most mortgage brokers do not use these tactics. You can use a mortgage calculator to compare loans and determine whether a high pressure broker is selling a bad mortgage product. For those brokers who do sell bad products, certain states have begun to take action.

Joining a growing number of states in the battle against predatory mortgage lending, Massachusetts enacted a strong anti-predatory lending law earlier this week. The new law passed with overwhelming bipartisan support and with the endorsement of both mortgage industry trade groups and consumer and civil rights advocates.

Among the law’s significant provisions:

Triggers strong consumer protections for loans with fees greater than 5%. The law establishes a comprehensive definition of points and fees to remove the incentive to structure loans in a manner to evade the law’s coverage.

Prohibits “flipping” on all home loans, the practice of knowingly refinancing an existing home loan unless the refinancing is in the borrower’s interest.

Confused about how to get a loan for your dream house? The folks over at Miami Real Estate Agent have put together an easy-to-use checklist that will help.

Shopping for a mortgage can be quite an overwhelming experience. Especially if you are a first time home buyer and have little to no knowledge about the loan process. If you have shopped online you have already found hundreds of mortgage sites quoting low ball rates for every loan term under the sun. One would think that if you just spend a few hours online you will find the lowest rate available and receive the best deal. This is not rarely the case. Don't play the interest rate game without a load of information, Read this first!

It is becoming clear that, even outside the big cities, housing is becoming less affordable.

Affordability -- a measure of the ability of the average household to buy a home at current mortgage rates -- has long been an issue for low-income buyers. But in some markets, such as Salinas, Calif., New York City and Honolulu, prices have increased so rapidly that buyers with healthier incomes are feeling the squeeze as well. And the number of such markets could climb if mortgage rates rise this year, as many economists expect.

U.S. home mortgage applications decreased last week. However, the MBA's seasonally adjusted index of applications for mortgage refinancing climbed 0.1.

Applications for U.S. home mortgages decreased last week as a drop in home purchasing activity offset a marginal increase in refinancing, amid a rise in interest rates, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity decreased 0.6 percent to 727.9 in the week ended Feb 18, after falling 0.5 percent in the MBA's prior week survey.

A sharp rise in interest rates may have dampened demand for mortgages. Top Stories

Fixed 30-year mortgage rates averaged 5.67 percent last week, excluding fees, up 17 basis points from 5.50 percent the previous week.

Despite the increase, mortgage rates remain historically low, which encouraged a modest amount of U.S. consumers to refinance their existing loans.

California Insurance Commissioner John Garamendi said he is "actively investigating" title insurers RE/MAX International, Fidelity National Financial Inc. and LandAmerica Financial Group Inc. Other states are involved with the developing investigation. The title insurance scam is described below. This will have no direct impact on home buyers, but may create legal liabilities for certain Title Insurance Companies and developers.

How the alleged title insurance scams work

• When individuals buy new homes, a home builder steers the buyer to a certain title insurance company. The same can be true for refinancings and previously owned home sales, with brokers and Realtors steering clients to certain title insurers.

• Beforehand, the home builder, lender, broker or Realtor cuts a deal with the title insurer: In exchange for large volumes of business, the title firm uses a "shell" reinsurance company. Reinsurance is legal - and protects title insurers from outsized claims. But these shell reinsurance firms are owned by the home builder, Realtor, lender or broker.

• The title insurer pays the reinsurer a hefty sum, and the reinsurer then feeds 50 percent of its fee back to its owners. These reinsurance firms don't pay a penny in claims.

• For example, if title insurance costs $1,000, the insurer keeps a $350 processing fee, then passes $650 to the reinsurer. The reinsurer then kicks back $325 to the home builder, lender, Realtor or broker and keeps $325.

• The extra fees are folded into costs borne by home buyers.

If you are cash strapped, a negative amortization loan might do the trick. But make sure you understand how it works. You might start with a negative amortization loan and then refinance your home when you have better cash flow.

I just learned about something really devious called a negative amortization mortgage (or any other type of loan). As Dr. Don explains:

Negative amortization means that your loan balance is increasing instead of decreasing. With a negative amortization loan, when your monthly payment on an ARM (adjustable-rate mortgage) isn't enough to cover the interest expense and principal payment, the shortage is added to your loan balance.

Say, for example, than in a normal mortgage your monthly payment is $2000. Of that, $400 may go towards paying off the principal and $1600 may go towards paying interest on the loan. With a negative amortization mortgage your monthly payment on the same size loan could be $1200 instead of $2000, but each month the entire $1200 would go towards paying interest -- and an additional $800 could be added to your principal. Thus, at the end of each month you owe more on your house than you did at the beginning of the month.

Home Insurance may not cover everything you think it does. Southern California is having lots of mudslides and water damage due to unusually strong winter storms this year.

Are flooding and mudslides covered by most common homeowners insurance policies?

No. Standard homeowners insurance covers rain and wind damage but not property ruined by flooding, landslides or mud. The rule of thumb is that if the damage is caused by falling rain, it's covered; if it's caused by rising water, it's not.

Flood insurance is available but takes 30 days to activate and costs $300 to $600 a year, according to the Insurance Information Network of California.

Although no carrier protects against landslides, flood insurance may cover minor mud damage, said Pete Moraga, a spokesman for the network.

Our mortgage calculator doesn't calculate adjustable rate loans. You might want to try another calculator (the advertising bar at the top usually has other mortgage calculators). Here's a brief explanation of an ARM.

The Adjustable Rate Mortgage (ARM) It is often referred to as an ARM. The interest rate charged on this loan is pegged to an index. If the index changes, the rate will change accordingly. The index could be pegged to the following: Treasury Bill Rates, The Prime Rate, Libor, 6 month CD rate and the average rate for loans closed, called the Federal Housing Finance Boards National Average Contract Mortgage Rate. The indexes are usually published in the newspaper.

The ARM initially offers low rates to attract people to this type of loan since the initial rate is low. From here, the rate could go higher. There are several components that go in to calculating an ARM.

Our mortgage calculator works for fixed rate loans. You should understand what it means to get a fixed rate or a variable rate loan. Here's info on fixed rate loans.

The seller accepted your offer and the lender approved your loan application. So what type of mortgage do you pick given the choices in the market today? There are quite a few considerations: What is your future earning potential, how long do you plan to keep the house and where do you think interest rates are going. Finally, how big should your mortgage be? The basic rule is the annual upkeep of your property (mortgage payments, utilities and insurance) should not exceed 30% of your gross annual income.

Fixed Rate Mortgage This is the most common type of loan. The loan is repaid with monthly payments of principal and interest over a fixed term. The interest rate stays the same over the life of the loan. The term can be 10, 15, 20 or the popular 30 year term. In this type of arrangement, the interest is front loaded. In the first few years of the loan, interest will be paid down. It’s only later that you will start building equity.

A fixed rate mortgage is ideal for those who plan to stay in there houses for a long time.

Mortgage interest rate news on February 20, 2005.

Rates on 30-year mortgages fell for six straight weeks but edged up slightly last week, reflecting rising rates in financial markets. Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 5.62 percent for the week ending Feb. 17, up from 5.57 percent the week before. It was the first time 30-year rates had gone up since the last week of 2004. Rates on other types of mortgages rose as well. Analysts said the rate increases occurred because investors choose to focus on a variety of economic reports that showed strength in the economy, raising concerns about future inflation pressures.

Here's an excited new home buyer who built from a developer. If you build your own house, you'll need a different mortgage calculator than the one on this blog. Construction loans work very differently from conventional home loans.

We're closing on the house June 1st and I wanted to post the before and after shots of the house.

Zawodny has a full series on his experience buying a house. I don't think he included the mortgage calculator, but there's a great one on this blog. Here's the part where he signs closing documents. Things didn't go smoothly.

On Tuesday we finished up nearly all the paperwork necessary for be to become the owner of the new place. That involved, among other things, going to an office of First American Title to sign about a billion documents, most of which contained redundant information. When I got there, I began looking over the paperwork. The first thing I noticed is that their one page estimate of how much money I'd owe for closing did not match the estimate I had previously seen. This one was about $4,000 more. That's a problem because I already had a cashier's check (got it that morning) made out for what I believed to be the proper amount. After hunting thru the other paperwork I figured out the bug. It was a stupid typo. Someone had transposed a few numbers when copying them off a Washington Mutual document. They seemed to think I had paid over $4,500 for a home appraisal (it was really $250). I brought this to the attention of the First American person who was there to work with me. She was surprised by this and set about calling to figure out what to do. Shortly after, my realtor arrived and I told her what happened. She explained that the copy I had seen earlier via e-mail was the corrected one. She had spotted this error and got it corrected earlier in the day before I ever knew. But the brain-trust at First American didn't bother to up the updated version in my packet.

Make sure you have home insurance! Some mortgage calculators will help you determine how much it costs. The link above describes an episode of Extreme Makeover where the Dore family's house was rebuilt by volunteers. But you can't count on volunteers if your house burns down.

From ABC's Extreme Makeover:Home Edition site: As a struggling widow of three daughters, Roseanne Dore is no stranger to hardship. The family was dealt a tremendous blow when their Kingston, Washington home, originally built by Roseanne and her husband, burned to the ground in March 2004. Following the devastating news of the fire, Roseanne found out that their home insurance policy lapsed when their agent retired. The structure was uninhabitable. While figuring out what to do, Roseanne moved her three daughters into a half-built, backyard utility shed that had no plumbing, electricity or running water. Now, the Dore family will be getting a very different home from the original 856 square ft. house, as well as new lives.

Your mortgage calculator probably can't factor in developer upgrades, but this article may help you sort through buying a new tract home. Click above for full answer.

The LA Times real estate Q & A recently answered a reader's question that may be on the minds of Twin Cities home seekers out there Parade Shopping this spring:

"We want to buy a new home in a specific development. But the builder insists we use his mortgage company. The terms sound good but...[we'd prefer to shop around]...the builder says, 'If you want to buy one of my houses, you have to finance it with my mortgage lender.' Is this legal?"

Their answer, and a few other thoughts on dealing with builder/lender combos by clicking below.

Their answer, in brief, is that it is illegal in most states (Minnesota included) for a builder to require you to use a particular lender, but many [as we've pointed out] use various incentives to make it nearly impossible to avoid.

All of which might leave you wondering: How is it that builders can offer thousands of dollars of upgrades and other incentives, simply for using their lender?

I agree with the sentiment expressed. For a link to the Mortgage Professor and lots of info on Mortgages and Mortage Calculators, click the link above.

The Mortgage Professor

This site keeps getting better and is a tremendous resource for buyers and sellers.

This site has a great glossary of economic terms related to Home Mortgages. I've included the "A" section, but click above for the rest of the alphabet.

Economic Terms Glossary by Mortgage Refinance Info

Adjustable-rate Mortgage (ARM): A mortgage loan with an interest rate subject to change over the term of the loan. The interest rate is tied to the performance of a specified market rate, such as the cost of funds index calculated by the 11th District of the Federal Home Loan Bank Board, or the yields on one-year or six-month U.S. Treasury securities.

Amortization: The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.

Average Hourly Earnings: A monthly reading by the Bureau of Labor Statistics of the earnings of hourly plant and nonsupervisory workers in the private sector. While the AHE excludes salaried workers (unlike the employment cost index), it is available each month with only a brief lag. Released by BLS as part of the Employment Situation release, the report is generally issued on the first Friday of the month for the prior month.

You can download this calculator on your Windows computer. Go to the link above to fetch it.

Free Mortgage Payment Calculator, 2.5.01 4/1/2004 -

Wheatworks released an update today for Free Mortgage Payment Calculator, 2.5.01, a Windows»-based home loan payment calculator.

Learn more at: http://www.wheatworks.com/freempc.htm

Download it and Enjoy! It’s Free!

This blog has great resources for mortgages. You can find the links for each of the calculators by clicking on the link above.

Mortgage Payment Calculator
This calculator figures your monthly mortgage payment based on the loan amount, interest rate and length of the loan.

Mortgage Principal Calculator
This calculator figures the principal balance remaining after certain number of years of payment.

Mortgage Length Calculator
This calculator figures the length of your mortgage depending on your monthly payment.

How much can I afford?
This calculator figures how much you can afford based on your your income, debt & other factors.

Tax Benefits of Buying A Home
This calculator estimates the tax benefit of buying a home.

Should I buy or rent ?
This calculator analyzes the total cost to rent versus the total cost to own.

Should I Pay Points for a Lower Interest Rate?
This calculator figures the breakeven point for the points to be paid.

Should I Consolidate Debt into a Home Equity Loan?
Find the length for paying off a consolidation loan if you make a payment equal to your total monthly payments before consolidating.

How much Income do I need to qualify?
This calculator figures out how much income you need to qualify for your desired home.

Loan Amortization Calculator
This calculator will amortize your mortgage over the loan period and based on the interest rate.

Should I Refinance?
Based on your current and calculated mortgage payments, this calculator figures your monthly savings if you want to refinance your mortgage.

What is the APR for this Loan?
This calculator estimates the Annual Percentage Rate (APR) for a given loan based on its parameters.

What is the APR for this ARM Loan?
This calculator estimates the Annual Percentage Rate (APR) for a given ARM loan.

What will my ARM Loan Payment Be?
This calculator estimates the initial payments as well as the future payments for an ARM mortgage.

Canadian Mortgage Payment
This calculator figures your monthly payment based on your input - conventional mortgage financing compounded semi-annually.

Which Loan is Better?
This simple calculator calculates difference between your monthly payment based on your input.

Standard vs Bi-Weekly
This calculator performs a comparison between loans with monthly vs. bi-weekly loan payments.

Pre-Qualify: How much do I qualify for?
This calculator figures out how much of a mortgage loan you can qualify for.

Interest Only Calculator
This calculator will show an actual period of interest only payments over that period based on your loan parameters.

How come different people give you different answers when you ask "How much can I spend on a house?" Because everyone calculates it a little differently. Every mortgage calculator takes into account different parameters. This article should help.

"My financial planner said I could afford to spend $250,000 for a house, my real estate broker said $280,000 and a calculator I found on the internet said $295,000. How come these large differences?"

The affordability calculation is fairly complex when done correctly, and some approaches oversimplify it. The calculation also involves a number of assumptions that affect the answer.

To do it properly, affordability must be calculated three times using three different rules. I call these the "income rule", the "debt rule", and the "cash rule." The final figure is the lowest of the three. When affordability is measured on the back of an envelope, which real estate brokers often do, usually it is based on the income rule alone, ignoring the other two. This can result in error.

Go to this excellent site for more information on the three rules and how much house you can afford.