- Mortgage amount
- Original or expected balance for your mortgage.
Taxpayers can deduct the interest paid on first and second mortgages up to
$1,000,000 in mortgage debt (the limit is $500,000 if married and filing
separately). Any interest paid on first or second mortgages over this amount is
not tax deductible. Home equity loans are limited to $100,000 or the amount of
equity you have in your home. Our calculator limits your interest deduction to
the interest payment that would be paid on a $1,000,000 mortgage.
- Interest rate
- Annual interest rate for this mortgage.
- Interest rate after taxes
- Annual effective interest rate, after
taxes are taken into account. Please note that in addition to the $1,000,000
mortgage debt limit; this calculator assumes that your itemized deductions will
exceed the standard deduction for your income tax filing status. If your
itemized deductions don't exceed your standard deduction, the benefit of
deducting the interest on your home will be reduced or eliminated. For 2004 the
standard deductions are $9,700 for married couples filing jointly, $4,850 for
married couples filing separately and singles, and $7,150 for heads of
household. You should also be aware that the total tax savings may be less for
higher incomes that have their allowable itemized deductions phased out.
- Term in years
- The number of years over which you will repay this
loan. The most common mortgage terms are 15 years and 30 years.
- Monthly payment
- Monthly principal and interest payment (PI).
- Federal tax rate:
- The marginal federal tax rate you expect to pay.
- State tax rate:
- The marginal state tax rate you expect to pay.
- Annual Percentage Rate (APR)
- A standard calculation used by
lenders. It is designed to help borrowers compare different loan options. For
example, a loan with a lower stated interest rate may be a bad value if its fees
are too high. Likewise, a loan with a higher stated rate with very low fees
could be an exceptional value. APR calculations incorporate these fees into a
single rate. You can then compare loans with different fees, rates or different
terms.
- APR after taxes
- Annual percentage rate after taxes are taken into
account. Unlike your after-tax interest rate, the APR after taxes takes closing
costs into account.
- Loan origination percent
- The percent of your loan charged as a
loan origination fee. For example, a 1% fee on a $120,000 loan would cost
$1,200.
- Discount points
- Total number of "points" purchased to reduce your
mortgage's interest rate. Each "point" costs 1% of your loan amount. As long as
the points paid are not a broker's commission, they are considered tax
deductible in the year that they were paid.
- Other fees
- Any other fees that should be included in the APR
calculation. These fees can vary by lender, but at a minimum usually includes
prepaid interest.
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