However, the results lack real-world reliability and can vary from one calculator to the next. Some calculators are so suspect, in fact, that they're accompanied by small-print disclaimers warning consumers not to rely on the results. Few mortgage calculators are accompanied by any explanation of how they work or what assumptions are used. The interest rate on a traditional 30-year mortgage is a fixed constant that can be plugged into an equation, but the interest rate on a hybrid or ARM is unknown beyond the first adjustment, which might occur in one month, six months, a year, three years, five years or 10 years, depending on the mortgage. There's no way for a calculator to account for this unknowable factor.
Some calculators tackle the worst-case scenario.
That's useful up to a point, but again, the reliability of the results still depends on secret internal assumptions and formulas and the accuracy of user-entered data. Refinance calculators usually ignore the longer term on the new mortgage. Many people refinance their existing mortgage with the goal of lowering their monthly payments. However, if you've been making payments on your existing mortgage for some time and the new mortgage will be amortized over a full 30 years, refinancing can cost more over the lifespan of the loan even if the monthly payments are lower. Mortgage calculators that purport to show whether you should refinance tend to focus on the monthly payment and the payback period for the refinancing costs, while ignoring the longer term of the new mortgage.