Buying a home is not a very simple process. Complicated legal issues and mathematical calculations are involved in it. Different variables are involved in the calculation of your monthly mortgage payments. If you take out a home loan, your lender and the real estate agent will provide you an approximate estimate of your monthly payments. But, it is recommended that you should crunch the numbers yourself. With the help of mathematical formulas, you can calculate your payments on your own. You can also use an online mortgage calculator to calculate a mortgage payment. This is very important because unless and until you get the correct estimate of your monthly payment amount, it would be difficult to get the correct deal. Follow these instructions to get the correct estimate.
- You may be paying a certain percentage of the purchase price of the house as down payment. Subtract the down payment that you make from the purchase price of the house. Then add all other fees, including the closing costs into the loan.
- You also need to track down some other expenses such as yearly homeowner insurance premium, private mortgage insurance (PMI) and annual property taxes.
- This loan amount is calculated by subtracting the down payment and adding the closing costs. Thereafter, you have to add the estimated figures of insurance, taxes and private mortgage insurance so as to derive the total amount that you have to repay annually. From that figure, you can then easily get an estimated figure of your monthly mortgage payment amount.
- To obtain the yearly insurance premium amount that you have to pay, you can get in touch with an insurance agent. The insurance agent can provide you the correct estimate of the annual insurance premium amount.
- To get an estimate of the yearly property taxes, you can talk with your real estate agent. The lender from whom you are taking out the loan should also reveal this information in the good faith estimate (GFE) document. Otherwise, you can also visit local tax office to get the estimate of annual property taxes on your home.
- You also have to take into account the private mortgage insurance premium amount. Usually, if the down payment amount that you make is less than 20% of the purchase price of the house, then you have to mandatorily pay the PMI. The amount of the PMI depends upon the loan to value ratio (LTV). If the LTV is 100%, then generally the PMI is 1%. With decreasing LTVs, PMIs also go down.
- With all these information, you can find out your monthly mortgage payments by using an online calculator. You have to put correct figures in the calculator so as to get the correct estimate.
- You can also get this estimate by using a spreadsheet. By using a mathematical formula, you can get the amount of money that you will have to repay for the loan amount that you have taken out.
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