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February 20, 2013Answering the question how to calculate mortgage payments is far simple than you imagine. To fulfill this need you can find so many financial tools in the internet which could help you to calculate monthly mortgage payment. Before using the online mortgage calculator you should know what are the input requirements you will be asked to enter as input.
To calculate monthly mortgage payment make sure you are having the following information readily on your hand.
- Principal amount (It is the actual exact price of your home)
- How much you need to pay as a down payment
- Interest rate
- Private Mortgage insurance
- Total money that will be needed in your escrow account
Let’s see about the requirements of online mortgage calculator in detail.
Principal Amount
Principal amount depicts the original price of your mortgage. Normally the average term for any mortgage is thirty years. So you can calculate the monthly mortgage payment
By using the simple formulae given below
Monthly mortgage payment = (Principal amount / 30) / 12.
If you pay only the monthly mortgage payment then you will need to pay for the entire 30 years. If you can pay off little extra apart from the compulsory amount, you are actually decreasing your principal amount. So you can reduce the total amount that needed to pay over your life time. Also note when your principal amount gets lower you are also decreasing the interest rate too.
Closing Costs
Upon closing the mortgage loan, most of the times you need to include appraisal fees, many closing costs and all other assorted costs. If you don’t want to pay all these cost at the time of closing your loan you can roll out these costs in to your mortgage.
Down Payment
The down payment you are going to pay on your mortgage is not only makes the lender to feel that you are having a vested interest on your home, but it also helps you to reduce the total credited principal amount.
Interest Rate
It is the main factor that influences the monthly payment of your mortgage home loans every month. If you have obtained a loan at high interest rate then you will be losing your largest portion of your money every month for paying the interest alone. It is the reason why you need to double check the interest rates before obtaining any mortgage loans. It may seem as a very few interest points, but remember it can create a mark change of up to several hundreds of dollars. When you obtain a mortgage through the adjustable rate then your monthly mortgage payment will vary every month.
Private Mortgage Insurance
It is required by almost all mortgage lenders when the home buyer is ready to make only a small down payment. Regardless of the down payment, when you have a bad credit then the submission of PMI becomes an essential one. This home insurance actually helps the mortgage lender when the homebuyer defaults on their mortgage payment.
Escrow
It is nothing but a kind of saving account which will help you to pay off the things like PMI and property taxes. This is the mortgage lender’s way of protecting their interest rates on the property. So they will check whether you have a means for paying your homeowners insurance and property taxes.
Your property tax is subject to change according to your property value increase and decrease. So it is better to consult with your mortgage insurance provider at lease t once in a year to see whether you can bet interest rates.
Once you have all the above information on hand you don’t need to worry about How to calculate mortgage payments, just find out an online mortgage calculator and calculate monthly mortgage payment at free of cost.
