How to calculate a mortgage payment

When buying a house, one of the most fundamental things that a buyer needs to know is the approximate amount he or she needs to pay for the property. A responsible buyer knows how much they will owe the bank for the house and how long they will owe it. Note that before being approved for loan, a home buyer’s financial capacity is measured and the amount lent to them is determined by the ability to pay. This makes it easier for one to determine how much the monthly mortgage is and whether it is to be paid for in 15, 20, or 30 years.

Did you know that it is really easy to figure out a house payment? You do not need to hire an expert (and pay a fee) to be able to determine how much you should set aside every month when buying a house. To help you with your purchase, here are easy steps on how you can find out your house payment.

1- Identify the total purchase amount of the house you are buying. For instance, you are looking at a house with a purchase price of $500,000.

2- From this amount, subtract the down payment you made. For instance, you made a 10% down payment which is $50,000. Your mortgage loan balance now equals $450,000.

3- Identify the number of years you are able to pay for this purchase. For instance, if you are thinking of getting a 30-year mortgage… that will be 12 months in a year multiplied by 30 years equalling 360 payments.

4- Identify the annual interest rate and divide this number by the number of payments you are looking to make every year. For instance, your interest rate is at 5% so divide this by 12. 0.05/12 = 0.00417%

5- Multiply this interest rate by your total mortgage loan (Step 2). So that would be.00417 multiplied by $450,000 is equals $1,876.50.

6- Next, you have to use this fixed formula for a mortgage: 1-(1+monthly interest rates)^ minus total number of payments. For example, 1-(1+0.00417)^-360 = 0.776

7- To complete the computation, follow this formula: (monthly interest x total amount of mortgage)/ (1-(1+monthly interest)^ minus total number of payments). Hence, $1,876.50/0.776 = $2,418.17. (Note that since some numbers here were rounded off, the amount is not precise.)

Other than the mortgage payment computation, you would need to determine two important things: your monthly house insurance payment and your monthly property tax payment. To know how much property tax you should pay, contact your County Tax Assessor. Meanwhile, you would need to speak with your insurance representative regarding the monthly payments for home insurance. Once you have determined these two amounts, you may add them into your monthly mortgage payment. Now that you know how much is required from you when buying a house, you can now set aside this amount for years to come. You can save up some of this money, make sure you pay on time, and enjoy your home without being stressed on the monthly payments.

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