How Mortgage Calculators Help Avoid Risk On A New Home Loan

The US government and taxpayers are currently assuming default risk for about 90% of mortgage loans; In the past year, the government has spent about one trillion dollars bailing out financial institutions and homeowners due to mortgage defaults. Unlike the government, you won't assume unnecessary risk if you find a new home loan that you can genuinely afford, one that won't leave you unable to sell your home or refinance your mortgage.

Look for Mortgage Options Before Leaping into Home Shopping

Shopping for a home before comparing mortgage loans is risky as it puts pressure on home buyers to find financing after making an offer and doesn't allow time for investigating new home loan options. Getting pre-approved for mortgage loan before home shopping focuses your search on affordable homes. Review these factors for determining how (or if) mortgage loan terms can change over time:

  • Fixed or adjustable mortgage rates: Although fixed rate mortgage loans (FRMs) provide uniform P&I payments for the life of a mortgage loan, it may be possible to get lower mortgage rates for a few years with an adjustable rate mortgage (ARM) Consider how long you plan to keep the home you're buying, and if you'll sell in a few years. An ARM can be a good choice, but be sure to avoid prepayment penalties if there is any uncertainty of how long you plan to keep the property.
  • Repayment term: Paying off a mortgage in 15 years compared to 30 years can save thousands of dollars in interest. Mortgage rates for 15 year FRMs are lower than for 30 year FRMs. Don't take the higher payments of a 15 year FRM if you want the flexibility of making a lower monthly payment.
  • Exotic mortgage features: Fully understanding how features such as interest only payments, deferred interest, and negative amortization can affect your mortgage balance and repayment term can help prevent unpleasant surprises later.

Mortgage lenders expect questions and can help you find a new home loan matching your needs.

Use Mortgage Calculator Tools for Comparing New Home Loans

Using mortgage calculator tools assists in finding mortgage terms and features that work for you. In addition to comparing mortgage rates, you can estimate affordability, or how much payments will be. Making comparisons can also help you identify questions and clarifications you'll want to discuss with mortgage lenders before choosing your new home loan.



Posted By :
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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