Tuesday, April 5, 2011

How to use a mortgage calculator

An online mortgage calculator can quickly and easily predict both your mortgage payment and amortization schedule. All you’ll need to get an accurate account is the following information:
1. Mortgage amount.
If you're looking to buy a new home a mortgage calculator is a good way to estimate how much home you can afford. To get this number simply enter the amount of the house you’re considering buying, minus any down payment you may be planning on making. If you're refinancing an existing home loan, this number will be the outstanding balance on your mortgage.
2. Mortgage term.
This is the length of the loan you're considering. Many young or first time homeowners go with a standard 30 year loan but there are other terms readily available. There are both longer and shorter term mortgages available from various lenders. Home loans can range from as short as 5 years to some as long as 40 years or more. 
3. Interest rate.
Interest rates can vary from person to person either because of their own personal credit history or from geographic area to geographic area. You can get a projected rate by researching the mortgage rate tables for the area where you’ve been house hunting.
4. Mortgage start date.
If you're buying a home or refinancing soon, this should be the date you plan on closing. But if you're trying to get more information on a mortgage you already have, set the date to your original closing date.
Once you’ve entered these four pieces of information into the calculator it can instantly display a hypothetical mortgage payment for the situation you’ve entered. By changing key information, such as the length of the loan or slight changes to the interest rate, you can see how small changes can effect what you ultimately pay for your home. Wondering what you'll owe on your mortgage in July 2019? Curious how much you home will ultimately cost you once all the interest has been taken into account? By clicking the “Show/Recalculate Amortization Schedule” you can find out.
Because the mortgage calculator also offers the ability to enter any extra payments you may make on your loan it can also show you how much you can cut down on the amount of interest you pay or how to reduce the length of your loan.

Hedge the risk with a CD ladder

Even though CDs are a low-risk investment, you may be looking for something with even more security in a down economy. CD rates are fairly low, but building a CD ladder can hedge the risk of rate cycles by giving you the benefit of investing in both short and long-term maturities. It also gives you the advantage of liquidity, as laddering keeps your CDs consistently maturing and paying out.
How it works
Think of the rungs on a ladder to better picture how a CD ladder works. The first rung of the ladder is the shortest period. If you have $100,000 to invest over a five-year period, you’d invest $20,000 into a one-year CD on the first rung. The second rung would be a two-year CD at another $20,000 and the third a three-year CD at $20,000. This continues up to five-years. As each CD matures the next moves up a year, allowing you to reinvest that money each year or use it for other expenses. Since CD rates are low, CD laddering gives you the opportunity to reinvest each year if yields rise.
Find the best CD rates
If you decide to build a CD ladder, it’s important to find the best rates possible. Look for deals at banks, credit unions, savings institutions and brokerage firms to compare before you begin. Some institutions are posting higher rates to attract deposits.