March 4, 2007 11:38 PM
An Imperfect Mortgage Calculator
Mortgagecalculatorplus.com is a web site with only one purpose: an online mortgage calculator. Unfortunately, it didn't do its job too well.
Like other mortgage calculators, this one asks for your loan amount, interest rate and term (number of years). It also goes one step further by asking you to estimate your property tax and PMI (private mortgage insurance) ratio.
As a result, the calculator will show you the monthly payment you can expect, the total value of payments, total interest to be paid throughout the life of the mortgage, and the full amortization schedule. As part of the output, there are a few nicely drawn charts showing you the relative percentage of principal, interest, tax and PMI in your payment, and your mortgage balance over time.
However, this mortgage calculator is quite detached from reality in several aspects:
First, Private mortgage insurance (PMI) usually only applies when one's loan-to-value (LTV) ratio is above 80%, and banks are required to drop PMI once your LTV drops to below 78%. Therefore, it is almost inconceivable that one will carry PMI throughout the 15 years or 30 years of a mortgage.
Second, the calculator asks you to estimate your property tax as a percentage of loan amount. Usually, property tax is a percentage of total value of the underlying property, and therefore, an uninformed user may put a wrong percentage here, which will in turn lead to inaccurate results.
Third, the calculator labeled the monthly payment in the output as "Monthly Principal & Interest," which, according to my calculation, also includes property tax and PMI payments. It is quite some confusion that can be easily avoided.
Conclusion: Nice try on the graphic effects, but there are quite a few better mortgage calculators out there.
(While the above is a sponsored post, PFBlog is not required to provide a favorable review. Quality time was spent to study the subject website in completing this post to provide an independent opinion.)
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