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Mortgage Piggyback Calculator (13a)

Two Mortgages Versus One Larger Mortgage

Who This Calculator is For: Borrowers trying to decide whether they should take
a second mortgage, either to avoid mortgage insurance or to avoid the
higher interest rate on a jumbo as opposed to a conforming loan amount.

What This Calculator Does:This calculator compares the total cost of a combination
first mortgage plus a second mortgage to that of a larger first
mortgage on which the borrower pays either mortgage insurance
or a higher interest rate, over a specified future period. It also shows
the highest rate you can pay on the second to break even.

Enter the Following:
Information About You and Your House
   Is This Loan for the Purchase of a Property or a Refinance?
  Expected Years in House, Cannot Exceed Term
  Rate of Interest on Savings  (e.g. 3.5)
  Income Tax Bracket ( e.g. 27 )
  Current Value of House (e.g. 225000)
  Optional:  Expected Rate of Property Value Appreciation
Information About Larger First Mortgage
  Loan Balance  
  Interest Rate on Loan  (e.g. 7.50)
  Monthly Mortgage Insurance Payment 
  Points  ( Dollar Amount or Percent of Loan )
  All Other Closing Costs (e.g. 2250)
Information About Smaller First Mortgage Plus Second
  Size of First Mortgage:   80% of Property Value    User Specified   
  First Second
  Loan Balance  
  Interest Rate on Loan  (e.g. 7.50)
  Points  ( Dollar Amount or Percent of Loan )
  All Other Closing Costs (e.g. 2250)


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. 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. All settlement costs that might differ between any two deals. This includes all lender fees of any sort, and all third party fees (such as title insurance, apprraisals and credit report), but excluding charges of governments which cannot vary from one deal to another. Do not include escrow reserves for taxes and insurance, or prepaid (per diem) interest. This affects tax savings on points 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. This is the interest rate you could earn on the monies you spend during the period you are in your home. For most people, it would be the interest rate on a bank account or a money market fund. In after-tax cost comparisons, this figure is adjusted to an after-tax basis. The size of the mortgage insurance monthly premium is triggered by the down payment percentage. Mortgage insurance premiums drop significantly as the down payment crosses the 3%, 5%, 10%, 15% and 20% levels. When deciding on your down payment be sure to take this into account. To perform a "pre-tax" analysis select "Pre-Tax" from the drop down list. Estimate all closing costs other than points and enter your estimate for each loan here. For further information, read "How to Shop Settlement Costs". (Click on link at bottom of page) This is required only if your are now paying mortgage insurance. If you are paying mortgage insurance, we need to know the value of your house when the current loan was taken out so that we can figure out when the insurance payment will stop. We assume it stops when the balance reaches 78% of original value. The mortgage insurance premium is calculated automatically but you can override it. If you enter a value, mortgage insurance will be terminated when the loan balance equals 80% of the appreciated value of the property. If you select "80% of Property Value" above, the first and second mortgage amounts are calculated automatically. If you select "User Specified", you must enter a first mortgage amount that is less than 80% of propertry value, and the second mortgage amount will be calculated automatically. Try the "User Specified" option when a loan equal to 80% of value exceeds the maximum conforming loan limit, which in April 2002 was $300,700. Because the interest rate is higher on loans larger than that amount, it may pay to take a conforming loan that is smaller than 80% of value, even though that means that the second mortgage will be larger.