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Mortgage Term Calculator (15b)

Investing the Cash Flow Savings on a Longer Term Mortgage

Who This Calculator is For: Borrowers with sufficient income to afford the higher monthly
payment on a shorter term FRM, who want to know the rate of return they must earn on
the cash flow savings from a longer term to make the longer term pay.

What This Calculator Does: This calculator allows you to determine the rate of return
on investment of the cash flow difference between a short term and a long term mortgage
that would leave you as well off as if you took the short-term mortgage.


Enter the Following Information:
  Income Tax Bracket ( e.g. 27 )
 Select the Down Payment You Are Considering:
  Expected Years in House, Cannot Exceed Term
  Will Mortgage Insurance be Deductible for You? Yes      No  
  From To
  Loan Term, in Years
  Interest Rate Per Year (e.g, 7.50%)
  Mortgage Insurance (Monthly Premium Plan)


This is your marginal tax rate, the rate at which each additional dollar of income will be taxed. If you pay only Federal income taxes, it is the highest tax bracket you used when you calculated your taxes. Federal tax brackets currently are: 10%, 15%, 25%, 28%, 33%, and 35%. If you also pay state and/or local income taxes, these marginal rates can be added to the Federal rate. For example, if you had to pay 25% to the IRS and 5% to the state of Pennsylvania, your tax bracket is 30%. To perform a "pre-tax" analysis enter zero (0) as the tax rate. Mortgage Insurance is now tax deductible if your income is $100,000 or less for a couple, $50,000 or less for a single person. The period cannot exceed the shortest mortgage term. The period may be stated in fractions. For example, 25 years and 1 month would be entered as 25.083, 25 years and two months would be 25.167, and 25 years and 3 months would be 25.25, etc. This affects the after-tax analysis because on a purchase transaction points are fully deductible in the first year whereas on a refinance the deduction must be spread over the life of the loan. The rate of return changes with the length of time you stay with the mortgage. Mortgage insurance premiums are higher on ARMs than on FRMs but lower on ARMs that limit rate increases to 1% a year or less, than on other ARMs. Given the down payment and term you have selected, the numbers shown are typical annual premium rates for "monthly premium plans" that involve no upfront premium. You can override these numbers if you are quoted different rates for monthly premium plans.