Calculating Your Mortgage Payment
Dust off your old calculus textbook. It’s time to figure out what your monthly mortgage payment will be. Just kidding. Aksarben Mortgage has a handy mortgage calculator to do the heavy math lifting for you. But it is still important to be informed on what exactly your mortgage payment entails.
What does a mortgage payment include?
1. Loan payment. This refers to the principal of your loan. So, if you bought a $250,000 home and put $50,000 down, you have borrowed $200,000. The number of payments depends on the duration of your loan, 15 or 30 years. A 15-year mortgage has 180 payments; a 30-year mortgage has 360. Divide the amount borrowed by the appropriate number of mortgage payments to see what your principal payment is.
2. Interest on loan payment. This is the fee the mortgage lender is charging you (on the $200,000) for the privilege of borrowing money. The more you borrow, the more interest you will pay in the long run. Higher interest rates mean more out-of-pocket expense; lower interest rates means more savings. To determine your monthly interest payment, divide current rate by 12 (months in a year).
3. Private mortgage insurance (PMI). If you put less than 20% down on your home, most lenders will require you to carry added insurance to minimize their risk. A mortgage advisor can help you pin down the exact amount, but according to Freddie Mac, for every $100,000 you borrow, you will pay between $30-$70 each month generally.
4. Homeowners insurance. Homeowners insurance rates vary according to deductible size (higher deductible carry lower monthly premiums) and other factors. Consult an insurance professional, such as Aksarben Insurance, for an estimate of your monthly payment.
5. Property taxes. Property taxes are collected by the lender then put into an escrow account, handled by a third party, which pays taxes for the homeowner. Property taxes vary. Local government websites will list local tax rates as well as your home’s value.
As you can see, your mortgage payment covers much more than your loan. Know these five components, and you’ll know how much home you can afford.
Aksarben Mortgage has a mortgage calculator to make the number crunching easier. Check it out here. And don’t forget to reach out for help refinancing to take advantage of the lowest interest rates in years! Start Experiencing Your Good Life today. Contact the professionals at Aksarben Mortgage.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.