The basic calculation for a home payment is to multiply the annual interest rate on the loan by the number of months of the mortgage. For example, 5 percent – interest rate – multiplied by $ 250,000 – mortgage amount – multiplied by 360 – 30-year mortgage – equals $ 450,000. Divide that by 360 for the monthly principal and interest payment of $ 1,250. This gives you a fairly close approximation. The bank will calculate the interest based on each month. In other words, the 5 percent annual interest rate is .41 percent per month. Divide your taxes for the year and private mortgage insurance – PMI by 12 and add to the monthly payment.
Loan amount
The larger the loan, the higher the payment. With all other variables held constant, a $ 350,000 mortgage results in a $ 2,000 monthly payment. It increases to $ 2,500 for a loan of $ 450,000 and decreases to $ 1,500 for a loan of $ 250,000.
Loan duration
Thirty, 20 and 15 year mortgages are available. If you want to substantially reduce what you will pay for the interest on the loan, a 15-year mortgage does that very well. For example, a $ 250,000 mortgage for a 30-year loan results in total payments of $ 550,000 and monthly payments of $ 1,500. A 15-year loan results in total payments of $ 380,000 or savings of $ 170,000. The fair monthly payment for the principle and interest on the 15-year loan is $ 2,000.
Interest rate
The interest rate has the greatest impact on the total payment after the mortgage amount. A difference of as little as one percent can result in hundreds of dollars per month. Variable or adjustable rate mortgages are based on the prime rate and, as the name suggests, vary from period to period. In the first few years of making mortgage payments, most of the payment goes toward paying interest. As equity slowly accumulates and the total amount owed on the home decreases, the amount applied at the beginning of the loan accelerates. The $ 250,000 30-year mortgage at 6 percent yields a monthly payment of $ 1,800 at 4 percent, the payment is $ 1,550.
Where do you live
Taxes are property taxes and depend on where you live as well as the appraised value of the home. Market value differs from assessed tax value. Call the county assessor to get the tax rates for the neighborhood you are considering.
Sure
The insurance included in your mortgage payment includes private mortgage insurance if you have made a down payment of less than 20 percent. Varies depending on the size of the loan. Once the loan falls to less than 80 percent of the original mortgage amount, the PMI drops. If you don’t have your own homeowner’s insurance on the property, the mortgage company will obtain a policy and include that premium in the mortgage payment. The cost of the premium depends on the value of the building. Land is not included. Even if the house is destroyed, the land still has value.
Payment periods
Most mortgages are made once a month. However, if you pay half your mortgage payment every two weeks, an additional payment will be made within a year. There are 12 months in a year and 52 weeks. 52 divided by 2 equals 26 payments or 13 full payments.