Calculating Mortgage

How to Determine Your Mortgage Payment

When you buy a home, there is a good chance that you will finance some or all of the purchase. With loan terms of up to 30-years, you have to be sure that you can afford to make this payment each month for a large portion of your adult life. How do you make sure that you can make your payments on time each month without too much stress?

Get the Best Possible Interest Rate By Shopping Around
If you have a credit score above 700, you should be able to get the best possible interest rates on your loan. Today, you should have no trouble getting a loan at close to 4 percent interest. Your rate may be higher if you ask for lender credits or other concessions such as a down payment of less than 20 percent.

Use a Broker and Get Access to More Loan Options
A mortgage broker will not be tied to one bank or one loan type, which can help save you money on your mortgage. Instead, your broker will work with several banks to determine which one gives you the best interest rate and other loan terms. If possible, work with a lender that offers the lowest closing costs as this can save you hundreds or thousands of dollars at closing time.

Do You Need to Pay Mortgage Insurance?
If you put down less than 20 percent, you will need to pay mortgage insurance. The amount of this insurance varies depending on the amount you put down and how much the loan is for. Your goal should be to refinance your loan or otherwise get close to an 80 percent loan-to-value (LTV) as soon as possible to earn the right to drop this insurance.

While there is a lot that goes into your payment, calculating what you owe isn’t complicated. All you need to do is divide the principal balance by the number of payments to get your principal amount. Then, you will add finance charges, insurance and property taxes to that amount. This will be what you will pay each month until the loan is paid off and the house is officially yours.

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