Refinancing an Adjustable Rate Mortgage (ARM)

Jane Yeung

Are you a good candidate for refinancing your adjustable rate mortgage?

ARMs, or adjustable rate mortgages, have been very popular in recent years, particularly for first-time home buyers.  The concept of an ARM is to allow buyers to afford a home and a mortgage at a very low interest rate.  This low rate period usually lasts anywhere from five to maybe even ten years, but once the ARM is ready to be adjusted, the rate can skyrocket, sometimes even double, increasing the monthly mortgage payment for the buyer.

Refinancing an ARM is a great way to help convert that adjustable rate into a fixed rate.  There are many benefits to this, particularly the benefit of a stabilized mortgage payment.  It is important to remember, however, that by refinancing an adjustable rate mortgage, your rate will still most likely increase from the original introductory rate, but it will be nowhere near the rate that would be incurred if you were to allow your ARM to readjust.  Those interested in refinancing an ARM should also keep in mind that there will most likely be some closing and other costs involved in the process. Nonetheless, it’s usually a wise choice, as you’ll soon save the equivalent of whatever you pay in closing costs.

When refinancing an adjustable rate mortgage, it’s important to consult a professional who can help ensure you get the best newly fixed rate possible.  Often, credit plays a factor as well as your previous payment history and the equity that has built up in your home.  The length of time you plan to spend in your home is also a factor.  Often, lenders tend to help refinance those who are not planning on selling more so than those who want to refinance and then attempt to turn around and sell the property.   The benefits of refinancing an ARM are very clear: no longer will you have to worry about your interest rate changing, and you will have a mortgage payment that you can afford that will not change.

Amortization Calculator

Jane Yeung

Amortization is an interesting concept and one that a lot of people really are not aware of. In order to understand exactly how a mortgage amortization calculator can help you, it is important first of all to make sure that the term amortization is easily defined. Now, if you go by the dictionary definition, they basically just say that amortization is the “act of amortizing”, which is perhaps one of the most useless definitions to ever hit the books of the dictionary. Therefore, let us spend a few moments defining the concept of amortization before discussing the calculators that use it.

Amortization, simply put, is the process of assigning premium and interest payments into one payment rather than splitting them out into two separate payments. In other words, when you are amortizing payments, you are combining all of the different aspects of the same payment into one without offering the client the breakdown of those payments. Banks and other financial institutions do this all the time in any sort of loans they give out and ultimately people don’t really know what part of the payment that they make goes to interest and what part of the payment goes to paying back the actual premium. In all cases, amortization starts out with a higher percentage of the payment going to interest and a lower percentage going to principle. As the principle shrinks, so does the interest and therefore larger chunks of the same amount of monthly payments can go towards reducing the actual interest.

This is best served through the use of an example. If you have a premium of $100,000 borrowed from a bank with an annual interest rate of 8%, chances are you can get the bank to agree for you to pay that amount back over a 30-year period should you so choose. Under these circumstances, your payment amount each month would be $733.76 which in the first month would be a $67.09/$666.67 split between the premium and the interest and in the last month would be a $728.86/$4.90 split instead. The idea here is that at first you are paying down the interest with those same monthly payments, but once the principle shrinks the interest goes along with it and therefore a larger percentage of the payment can go towards paying down the principal amount.

So where do amortization calculators come in?  Well, what they do quite simply is they allow you to calculate everything that you need to know about amortization schedules based on simply inputting a few pieces of information. For example, a typical online calculator will get you to input the amount being borrowed, the annual interest rate, the number of payments each year and the total number of payments. This in turn will allow the calculator to figure out what the interest is each year and therefore cross reference that interest rate with the monthly payments you will then have to make. It is an impressive piece of software that can do all that and that is ultimately why mortgage amortization calculators are so effective.

Amortization Table Calculator

Jane Yeung

Amortization is an important concept in personal finances simply because amortization is needed in order to figure out exactly what the appropriate monthly payment would be. If amortization was not used, then you could see inconsistent monthly payment requirements or it could even get to the point where you would handle your own accounts and therefore potentially run into a situation where the interest rates were creating more and more interest without your being able to do anything about it. Amortization has the effect of standardizing the payments and allowing you to figure out exactly where you are in the payment scheme.

The breakdown of each monthly payment and how it relates to interest and principal is known as the amortization schedule. This is something that will help you greatly to figure out where in the process of paying back a loan you are, because ultimately you can easily refer to it if you know which month of the loan you are in.

Refinance Calculator

Jane Yeung

Mortgage refinances are a very interesting loan agreement because they allow you to amend a previous mortgage agreement to make that agreement better for you. However, not all refinances are created equal and indeed some refinances could actually be harmful to you financially because of the added interest charges that they indirectly represent. That is why a mortgage refinance calculator can be useful in letting you know exactly what you need to know regarding general refinances that you should be on the lookout for. Whether you use a general refinance calculator or one provided by a specific company, it is always helpful to have a reference of that kind on hand when considering your home loan options.

A typical mortgage refinance calculator will have a number of required fields. The first one will refer to your current monthly payment on whatever mortgage or home loan you have. Refinances can only be done for home loans for the most part, so if you don’t have a home loan owing, then there is little point in checking out refinances. In addition to that, the calculator will also ask for information regarding your current interest rate. Your current interest rate will determine how much extra you will pay for a refinance of a longer period and that is why the calculator needs this information to come up with a calculation that is useful for you to use.

In addition to that, the time left in the mortgage will also need to be discussed. This is in terms of the number of years left in the mortgage, the number of payments per year and therefore the total number of payments. This gives the calculator an image of what your amortization schedule is like and that is the most helpful piece of information it can be given.

Finally, the calculator will also ask you how much of the remaining debt you would like to refinance, as well as how much longer you would like the loan to be. Using these two key pieces of information and cross-referencing them with your current payment plan, the refinance calculator will do two things. Firstly, it will optimize the amortization to see which the best schedule for your refinance is and then it will return a number of results of products in its database that come close to that optimized value. It is a useful tool to have around because of this purpose.

Reverse Mortgage Calculator

Jane Yeung

Reverse mortgages are one of the newer and hotter products on the market today because they allow a person the opportunity to borrow a rather large amount of tax free money that they don’t have to pay back until they pass away or sell their house. It is in fact a great opportunity for a person to be a part of and while there are a number of things you should be considering when you look at mortgages, one thing that you can do to get things rolling rather quickly is to take a look at one of the reverse mortgage calculator websites online to see what your options might be.

Ultimately, there are a number of pieces of information that you are going to have to supply in order to get accurate results. Because a lot of results are different based on different geographies, you are going to find that the most reliable reverse mortgage calculators are going to be the ones that ask you for some method of spatial recognition; this is usually going to be a zip code because it is rare that anything more specific would be required. In addition to that, your birthday as well as the birthday of anyone co-signing the loan would be required in order to determine generally what benefits you might be eligible for (or whether you are eligible for benefits at all, in some cases).

In addition to those two pieces of information, you are also going to usually be asked for the estimated value of the property that you currently own. Like any other home loan, the value of a reverse mortgage is directly influenced by property values and that is why things like existing mortgages as well as current payment terms would also be useful information to a reverse mortgage calculator. Based on this information, it will give you a result.

Amortization Schedules

Jane Yeung

In order to understand what an amortization schedule is, it is first necessary to understand the concept of amortization. When you originally go ahead and sign up for a bank loan, what you are agreeing to do is actually to pay both the amount of the loan itself as well as the interest attached to that loan back to the lender over a certain period of time. Depending on the amount of money you borrow, the annual interest rate, the number of times per year that interest rate is compounded and the overall length of the period during which you pay back the loan, you are going to find that the monthly payment will be a certain amount.

However, while the monthly payment might be a certain amount, the breakdown of that payment will change over time. The payment will always pay down enough interest to keep the interest from expanding in absolute terms before moving on and devoting the rest of the payment to the principal. Because of this method, what you will find ultimately is that the payment breakdown is first slanted very much towards the interest portion of the loan rather than the principal and then over time the percentages change so that you are paying down more of the principal every month because there is less interest to worry about. The process of calculating the appropriate and consistent monthly payment based on changing values of interest and principal amounts is known as amortization.

Interest Rate Calculators

Jane Yeung

As the financial sectors become very popular in today’s world with more and more people becoming new homeowners for the first time, what you are going to see is more and more mortgage sites popping up around the internet in order to fill that void. A free market economy is driven by supply and demand and as long as the supply of people looking to become homeowners remains steady, you can expect that mortgage websites will be available all over the place in order to help a person plan their mortgage and possibly help them reach a decision as to what they actually want to accomplish with that same mortgage.

One of the things that you are likely to see listed quite frequently on the mortgage websites of today is something known as the mortgage rate calculator. Essentially, what this handy tool does is it allows you to actually take a look at some of the mortgage rates in an easy to use calculator. Typical mortgage calculators will have factors such as your credit rating, age, marital status, income and other factors taken into account by financial institutions when they consider mortgages. Based on the answers that you give to the questions on the mortgage calculator, a typical rate will be calculated for you.

This is an excellent tool because it allows you to get a general view of mortgage rates as they apply to you without having to do too much work in order to do so. However, there are some cautionary tales for you to take note of when it comes to using a mortgage rate calculator simply because there are a lot of things that mortgage rate calculators will not tell you. For example, you can actually negotiate certain contracts with different people if you are interested in getting a better rate and depending on reasons you give them, many financial institutions might be willing to actually lower rates; this is something you are unlikely to find out from a mortgage rate calculator.

This is in fact one of many different things that mortgage rate calculators do not take into account; which means that for the most part they are not very useful beyond giving you a general view of the mortgage rates as they may apply to you. In other words, there is nothing wrong with using a mortgage rate calculator right at the start of your shopping around, but when you are getting into the details of mortgages you have found and are considering prospectively, make sure that you do more than just consult a mortgage rate calculator.

Another handy feature of mortgage rate calculators is that they can let you know based on interest rates and mortgage amounts what your payment schedule is likely to be over the course of your mortgage. This is a feature that once again is very good in order to give you a general idea of what you might be up against, but at the same time is also a feature that is no substitute for the real thing from a real company. Make sure that you use the figures given to you by the calculator as a general guideline rather than as a rule.