Friday, January 28, 2011

3 situations that benefit by using a mortgage calculator

A mortgage calculator is typically used to calculate payments for a new mortgage, but it can also be used for several other common calculations. Consider these three other mortgage calculator uses.

Considering an adjustable-rate-mortgage
An adjustable-rate-mortgage, or simply ARM, is enticing due to its lower initial interest rate, but don’t be wooed until you plug it in to a mortgage calculator. Enter the ARM interest rate into Bankrate’s mortgage calculator with a 30-year term. Compare those payments to the conventional 30-year fixed mortgage payments. You’ll either be delighted about the possible benefits of an ARM – or pleased to step away from the risky venture despite the potential advantages.

Saying “bye” to private mortgage insurance
When you have 20 percent equity in your home, you can request that the lender waive the private mortgage insurance obligation. Using the mortgage calculator, you can see when you’ll reach this magic number.
Enter the closing date and original amount of your home mortgage and select “show/recalculate amortization schedule.” Multiply your original mortgage by 0.8 and find the closest matching number in the amortization schedule’s far-right column. This is approximately when you’ll have 20 percent equity in your home.

Paying off your mortgage early
Bankrate’s mortgage calculator allows you to enter amounts for “extra payments,” which can shorten your term and save you money. To avoid being the typical 30-year-fixed-rate mortgage holder, whose total interest payments are usually larger than the original principal on the loan, calculate potential savings using the calculator. Enter an extra payment goal in one of the boxes and click “show/recalculate amortization schedule” to see the difference. You could knock off years of your term and save significant amounts of money.

Friday, January 7, 2011

3 routes to better CD rates

While CD rates are hovering near record lows, they can still provide a safe place to store your money while earning some additional income. All CDs are not created equal, though. As you begin your quest to lock in an interest rate, here are three tips to help make your search more successful.

Take CD shopping seriously

Finding the most competitive CD rates requires some research. First, determine how much you can afford to invest and the length of time you can part with your funds. Then, start comparing rates at a wide range of banks. Rather than simply look at credit unions and banks in your town, go online to compare the best CD rates available nationwide. While larger amounts and longer maturity periods typically mean higher yields, you can find attractive rates for short-term CDs, too.

Find deals that do more for your dollars

Remember – the banking industry is competing for your money. With creative marketing departments on their sides, banks promote all kinds of programs for CDs to entice your interest. These deals may lock you into a longer maturity period, but they typically reward you with a higher yield. To determine if the deal is worth it, you can calculate your CD income before you invest.

Look closer at your CD

Before you make your final decision on a new CD, be sure to educate yourself on the fine print. The majority of CDs have stiff early withdrawal penalties. If you have any concern that you may need to remove your money before your account matures, make sure you find a CD with some flexibility.