Guides
Guides
Plain-English explanations of the rules behind the calculators — what the numbers mean, which figures are excluded, and where the answers come from.
Home
Buying, refinancing, and everything that comes with a mortgage.
Refinancing· 3
When does refinancing actually pay for itself?
Break-even is the first question and the easiest one. Here is how to calculate it, why a lower payment is not the same as saving money, and what it leaves out.
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What is the VA's 36-month recoupment rule?
The VA requires a streamline refinance to repay its own closing costs within 36 months. Here is what counts, what is left out, and the two seasoning clocks.
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Should I refinance to pay off credit card debt?
Trading a 24% card rate for a 7% mortgage rate looks obvious. What decides it is the blended rate and the schedule, plus a tax rule borrowers get backwards.
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Home equity· 4
HELOC or cash-out refinance?
Both turn home equity into cash. One keeps your mortgage and adds a variable-rate line; the other replaces the whole mortgage at a new fixed rate. What happens to the rate you already have usually decides it.
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How much can you borrow with a HELOC?
A HELOC is sized by combined loan-to-value: a percentage of your home's value, minus what you owe. The percentage is your lender's choice, and credit and income decide the rest.
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Fixed home equity loan or HELOC?
A home equity loan pays out a lump sum at a fixed rate; a HELOC is a variable line you draw as you need it. How you will spend the money, and how much rate risk you can carry, decide it.
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Should you use home equity to pay off credit cards?
A HELOC can cut a 25% rate to single digits. What it costs depends more on how you repay it than on the rate — and the draw period is where money goes missing.
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Buying a home· 8
Is it cheaper to rent or buy right now?
Comparing rent to a mortgage payment is the wrong comparison. Here are the costs a payment hides, why the answer is a break-even year, and the tax rule on exit.
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How much house can you actually afford?
What a lender approves and what you can comfortably carry are different numbers. Here is how approval really works, and why the 43% rule is no longer the test.
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Is it worth saving longer for a bigger down payment?
Twenty percent avoids mortgage insurance. Whether that is worth waiting three years for depends on what it costs, when it stops, and one FHA rule.
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Does waiting for rates to drop actually save you money?
A lower rate is worth a lot, but prices do not stand still while you wait. Here is how much a house can appreciate before a rate cut stops helping.
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FHA or conventional: which loan is cheaper?
FHA usually wins on the rate and loses on the insurance. One threshold decides it — at 90% loan-to-value the premium ends after 11 years, and above it, never.
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Is a VA loan better than a conventional loan?
The real comparison is a one-time funding fee against monthly insurance that stops. Here are the fee tiers, who pays nothing, and where the lines cross.
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Are discount points worth paying for?
A point costs 1% of the loan and buys a lower rate for as long as you keep it. Here is the break-even, why refinancing changes it, and the tax rule people miss.
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How do you compare two mortgage quotes?
The Loan Estimate exists for exactly this, and most people compare the wrong box. Here is which numbers to line up, and which quoted costs are binding.
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Your mortgage payment and payoff· 4
What's actually in a mortgage payment?
A mortgage payment is four separate bills collected as one, and sometimes a fifth. Here is what each part is, which ones move, and when the fifth one stops.
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Do extra mortgage payments actually save money?
Yes, and far more than most people expect. Here is what an extra $200 a month is actually worth, and why the same $200 started later is worth a fifth as much.
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Is it better to pay off your house or invest the difference?
A mortgage is the cheapest money most people ever borrow, which argues for keeping it. Paying it off is a guaranteed return, which argues for killing it.
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Should you pay off a debt or invest?
Paying down a loan returns exactly its rate, guaranteed. Investing might do better. Here is how to compare them after tax, and which number is only a forecast.
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Selling or moving· 2
Should I rent out my house or sell it?
Keeping your old home as a rental can build wealth, but the cash flow is often negative, the tax-free sale has a clock on it, and depreciation comes due when you sell.
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Should you sell your house before buying the next one?
One order leaves you between homes, the other leaves you carrying two payments. Here is what each costs, and the tax rule that punishes moving twice.
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Debt
Paying down what you owe, and what it is really costing you.
What is your blended interest rate?
A blended rate weights every debt by its balance, so a large cheap loan can hide a small expensive one. Here is how it is calculated, and the figure that shows what it leaves out.
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Snowball or avalanche: which actually clears debt faster?
The avalanche always costs less. The snowball is the one more people finish. Here is how big the gap usually is, and how to pick between them.
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Is a 0% balance transfer worth the fee?
The fee is up front and the new rate takes over the day the promotion ends. Here is the break-even, and two federal rules that protect you more than you think.
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Does debt consolidation actually save money?
One payment instead of five is easier to live with. Whether it is cheaper depends on the rate after the fee, the term, and which debts you actually roll in.
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How long will it take to pay off a credit card?
Paying only the minimum can take decades, because the minimum shrinks as the balance falls. Here is why, what your statement's payoff box shows, how carrying a balance costs you the grace period, and the main ways out.
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What interest rate are you really paying?
The rate on the offer sheet is not what the loan costs. Up-front fees raise the real rate, and the lender's own APR legally leaves several of your costs out.
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Which student loan repayment plan should you choose?
Which plans you can pick now depends on when your loans were disbursed. Here is what RAP does, how it differs from IBR, and why the lowest payment rarely wins.
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Should you refinance federal student loans?
A private refinance can lower the rate on federal student loans, but it ends the federal protections for good. Here is what you give up, who refinancing can suit, and who should usually avoid it.
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What's a good debt-to-income ratio?
Debt-to-income is the share of your gross income that goes to debt payments. Here is what counts, how conventional, FHA, VA and USDA guidelines read it, how student loans are counted, and why the guideline is not the limit.
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Money
Growing your savings and planning for what comes next.
Saving· 4
How do you calculate your net worth?
Everything you own minus everything you owe. The arithmetic takes a minute; the judgment calls are what make the number useful or misleading.
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How big should an emergency fund be?
Three to six months — but of what? The unit is the part people get wrong, and it is expensive either way. Here is the rule and where the money should sit.
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What does a savings account really earn?
The rate is only part of it. Here is why APY is the number to compare, what inflation does to the answer, and why safe is not the same as keeping its value.
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How does compound interest actually work?
Interest on interest, and why the curve bends late. The short version of a short subject, with the one number that shows why starting early beats saving more.
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Investing· 5
What will your investments actually be worth?
A projection is an assumption with a calculator attached. Here is what the assumptions do, why one point of fees costs so much, and the risk averages hide.
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What return do you need to hit your goal?
Work backwards from the goal and you get a required return. Whether it is reasonable depends on what the asset classes have actually delivered — a measurement.
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Lump sum or dollar-cost averaging: which wins?
Investing it all at once usually finishes ahead, for a reason that has nothing to do with market timing. Here is why, and what you buy by spreading it out.
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Should you reinvest dividends or take the cash?
Reinvesting compounds the income, which is right while you are building. What catches people is the tax bill that arrives whether you took the cash or not.
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What will you owe in capital gains tax?
Long-term capital gains rates are bracketed, not flat — and the gain itself decides the bracket. Here are the bands, the surtax on top, and the holding period.
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Retirement· 6
Are you on track for retirement?
The honest answer needs four numbers, and most people can name two. Here is what a retirement target is built from, and the assumptions that move it most.
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When should you start Social Security?
Claiming at 62 pays less for longer; waiting to 70 pays more for less time. Here is how the reduction and credits work, what a break-even age does and does not tell you, and what survivors, work and taxes change.
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Should you take the 401(k) match or pay down debt?
The rare personal finance question with a settled answer. Here is the arithmetic behind it, and where the real decision starts once the match is captured.
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Roth or traditional: which is right for you?
The usual framing is a bet on future tax rates, which nobody can win. The stronger argument is about the contribution limit, and most comparisons miss it.
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What does withdrawing from retirement early actually cost?
The 10% penalty is the part everyone knows and the smallest part of the bill. Here is how the tax is really computed, and why withholding is not the tax.
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Should you take a 401(k) loan?
A 401(k) loan pays its interest back to you, so the rate is not the cost. Here is what the real cost is, how much you can borrow, what happens if you leave your job, and when another loan is better.
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Auto
What a car really costs, from the lot to the day you sell it.
Choosing a car· 5
How much car can you actually afford?
A lender's maximum and a sensible budget are different numbers. Here is what the 20/4/10 rule actually says, and why the payment is the wrong thing to shop for.
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New or used: which is the better buy?
The price gap is not the saving. The saving is the depreciation someone else absorbed — set against a higher rate, more repairs and a shorter life.
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Do electric cars actually save money?
Fuel and maintenance are genuinely cheaper. Depreciation has been worse, and the federal credits have ended. Here is the comparison without the incentive.
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What does a car really cost to own?
The payment is the smallest part of the answer. Here is the full list, which line is largest, and why the biggest cost never sends an invoice.
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How fast does a car lose value?
Steeply at first, then more slowly — and the loan does not follow the same shape. Here is where the two lines cross, and how long a new car spends underwater.
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Paying for it· 5
Should you finance a car or pay cash?
Paying cash saves the interest. Financing keeps the money invested. The answer turns on one detail: the rebate and the promotional rate are alternatives.
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Is leasing or buying a car cheaper?
Leasing has the lower payment and buying has the lower cost, in almost every case. Here is why, what a lease charges for, and the maintenance myth behind it.
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How is a lease payment calculated?
Three numbers produce a lease payment, and the dealer controls all three. Here is the formula, the money factor conversion, and what negative equity costs.
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Should you buy out your lease?
Buying your leased car makes sense when it is worth more than the buyout costs, or when the charges for handing it back would eat the difference. Here is how to add it up.
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Should you trade in your car or sell it privately?
A private buyer usually pays more, but a trade-in is quick and in many states cuts the sales tax on your next car. Here is how to compare them, what owing more than the car is worth changes, and how a private sale works with a loan still on it.
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After you buy· 2
Is refinancing a car loan worth it?
The saving is real when your rate or your credit has moved. The two things that quietly undo it are a longer term and rolled-in fees, which are worse on a car.
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Should you pay off your car loan early?
Paying a car loan early earns a guaranteed return equal to its rate, on most loans. Here is how to tell if yours is one of them, what should come first, and how to make sure extra payments count.
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