Posted by Lending Club :: September 12, 2007 @ 7:25 am

The Internet is flush with calculators and tools to help you visualize and manage your mortgage. In an effort to clarify how I personally manage my finances, I wanted to disclose the site that I use. My favorite calculator is Karl Jeacle’s Mortgage Calculator.

You can set the parameters for your mortgage using either the slider bars or the text input boxes. Necessary fields are the principal amount, length of loan, start date, and interest rate. Using the text input boxes, which I use, you can also add in insurance and tax payments, if you pay these through an escrow account along with your mortgage payment. Once the calculator has your correct monthly payment amount, the real value of the program comes through.

I use the prepayment input boxes to see the effect of different scenarios. You can enter monthly, yearly, or one-time prepayments. It’s amazing to see what a huge effect even a small prepayment can have over the life of a loan. The results are displayed as a graph, but you can also generate a table with a simple click. Seeing the payoff date of my mortgage getting earlier, as a result of small sacrifices, helps me to realize the value of prepayment.

When you enter prepayment information, the calculator tells you how much faster your mortgage will be paid off as well as how much money you’ll save in interest. It gives the savings in actual dollars and what it calls “real savings,” which is the value of your savings in today’s dollars. Due to inflation, saving on interest in the future is not the same as saving money today, so the real savings calculation gives a more accurate representation of what you’re actually saving.

The calculator has many more advanced features that I typically don’t use. If you have an Adjustable Rate Mortgage, make sporadic extra payments, or similar circumstances, these advanced features will allow you to model your situation as well.

As I often say on the Lending Club blog, knowledge of your financial situation is the first step in gaining control of it. For me, this mortgage calculator gives insight into my mortgage, allows me to simulate different scenarios, and lets me compare my options when I’m considering how to best use my money. While it’s not the only tool out there with such features, it’s my favorite and the one that I use regularly. I believe that you may find it useful as well.