Down Payment Calculator (12a)

Rate of Return on Larger Down Payment

Who This Calculator is For: Borrowers with enough cash to make a down
payment in excess of the minimum required on a particular loan, who want to
know whether using the cash to increase the down payment earns a high rate of return.

What This Calculator Does: This calculator allows you to determine the rate of return
on an investment in a larger down payment that reduces or eliminates mortgage
insurance, and that might reduce the interest rate.


Enter the Following Information:
  Loan Term, in Years
  Income Tax Bracket ( e.g. 27 )
   Is This Loan for the Purchase of a Property or a Refinance?
  Expected Years in House, Cannot Exceed Term
  Optional:  Expected Rate of Property Value Appreciation
  Will Mortgage Insurance be Deductible for You? Yes      No  
From To
 Select the Increase in Down Payment You Are Considering:
  Monthly Mortgage Insurance Premium: Input Annual Rate (e.g., .54 (percent))
  Mortgage Insurance Paid Upfront: Input Single Premium Rate (e.g., 1.5)
  Interest Rate Per Year (e.g, 7.50%)
  Points  (e.g. 1.5)


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 currently tax deductible if your income is $100,000 or less for a couple, $50,000 or less for a single person. 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, but not by very much. This classification by type of mortgage determines the mortgage insurance premium. If the mortgage is an ARM on which the initial interest rate holds for 5 years or longer (often referred to as 5/1, 7/1 or 10/1), select "Fixed Rate". If the mortgage is an ARM on which the initial rate holds for less than 5 years but it has rate adjustment caps of 1% or less, select "ARM w/Rate Caps <=1%. The premium rate is multiplied by the loan amopunt and divided by 12 to obtain the monthly premium. For example, a quote of 0.54 (percent) on a $200,000 loan results in a monthly premium of $90. If you enter a value, mortgage insurance will be terminated when the loan balance equals 80% of the appreciated value of the property. The premium rate is multiplied by the loan amount, and the product is added to the loan amount. For example, a quote of 1.5 (percent) on a $200,000 loan results in a new loan amount of $200,000 + $3,000 = $203,000.