1. What is the Withdrawal Rate?

The withdrawal rate represents the percentage of the principal that is paid out as mortgage payment. It helps in understanding the proportion of your principal that goes towards mortgage payments.

2. How Does the Calculator Work?

The calculator uses the withdrawal rate formula:

Where:

• \( Mortgage\ Payment \) — Monthly or annual mortgage payment amount in dollars
• \( Principal \) — Total loan amount in dollars

Explanation: The equation calculates what percentage of the principal is being withdrawn through mortgage payments.

3. Importance of Withdrawal Rate Calculation

Details: Understanding your withdrawal rate helps in financial planning, assessing mortgage affordability, and comparing different loan options.

4. Using the Calculator

Tips: Enter mortgage payment amount and principal in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good withdrawal rate for mortgages?
A: This depends on interest rates and loan terms, but typically lower rates indicate more affordable mortgages relative to the principal.

Q2: How does this differ from interest rate?
A: The withdrawal rate includes both principal and interest payments, while interest rate only reflects the cost of borrowing.

Q3: Should I include taxes and insurance?
A: For a pure mortgage withdrawal rate, use just principal and interest. For total housing cost percentage, include taxes and insurance.

Q4: How does loan term affect withdrawal rate?
A: Shorter terms typically have higher withdrawal rates as more principal is paid each period.

Q5: Can this be used for refinancing decisions?
A: Yes, comparing withdrawal rates can help evaluate if refinancing improves your mortgage terms.