Calculating Your Monthly Mortgage
When you’re shopping for a first time home owners loan, your focus is likely on the price of the house you’re interested in. Generally speaking, the more affordable the house is, the smaller the loan you’ll need to take out. The smaller the loan is, the more affordable the payments will be. Unfortunately, it’s not always as simple as that. You need to calculate the your true monthly mortgage payment before you can decide if the house really fits your budget. Here’s how.
Understand What Goes Into Payments
Your monthly payments on your first time home owners loan is broken up into two main categories: the loan principal and the loan interest. The loan principal is the full amount that you borrow to buy the house. The interest is what gets charged each month for the full term of the loan. This number changes over time as you make payments and the principal gets smaller. If you have a fixed-rate mortgage, that interest rate will stay the same for the full loan term. But if you have a variable rate mortgage, the interest will change with the market. This means your payments may be smaller some months and larger during others.
You’ll Also Want to Estimate a Few Things
Your loan payments should also include property taxes, homeowners insurance payments, and any homeowners association fees you may need to pay each month. If you’re not sure, make an educated guess. Before you close on the house and follow through with the loan, you’ll be able to find out exactly what those costs will be.
The Basic Calculation
Essentially, your monthly payment is the full amount of money you borrow divided by the length of the loan. Then, you’ll add the amount of interest accrued each month, the cost of homeowners association fees, property taxes, and insurance.
Use Our Calculator
If you’re looking to take out a first time home owners loan, you’ll want to estimate your payments for each house you’re interested in. The easiest way to do it is to use our calculator and let it do the math for you.