Article provided by: Seattle's Mortgage Broker – Joe Tafolla
Home loan calculation doesn’t have to be intimidating. While there are many mortgage calculators out there, it’s a good idea to know the math behind it. In this post, the team at Seattle Mortgage Broker will teach you how to calculate down payment, interest rate, and how your monthly payment change so that you can choose the best loan deal.
How To Calculate A Mortgage Payment
How Much Down Payment Do You Have To Pay?
While you can pay a down payment as low as 3.5% of a home’s value, most lenders or banks consider an ideal down payment to be 20% of a home’s total price. For instance, someone with $200,000 cash can make a 20% down payment to take a home loan worth $1000,000. You would be left with $800,000—the amount you will need for the mortgage.
Paying a 20% down payment of your total home loan will help you avoid paying private mortgage insurance, which is required under that threshold. However, if the 20% goal is not attainable, you can try to pay at least a 10% down payment to get a better interest rate than you’d get with 3.5%.
Calculating The Monthly Interest Rate
The fee a bank or lender charges you is the interest rate expressed as a percentage of the borrowed money. Typically, a homebuyer with a high credit score will get a very low-interest rate than someone with bad credit, and the risk of the lender loaning that person is lower.
When getting a mortgage, the lender will provide you with an annual interest rate. You’ll need to know your monthly interest rate if you want to do the monthly payment calculation. To know your mortgage monthly interest rate, you need to divide the annual interest rate by 12. For example, if you get a loan with an annual interest rate is 5%, 0.41 (5/12 = 0.41) would be the monthly interest rate.
Calculating The Number Of Your Monthly Payments
15 years or 30 years is the most common term for a mortgage. To determine the number of monthly payments to make, you need to multiply the number of months by years. This means a 15-year mortgage would require 180 monthly payments. You will need these figures if you’re filling the numbers into a formula.
Why Should You Use A Mortgage Calculator?
- Mortgage calculators can help you decide which loan is right for you
- Mortgage calculators can also help borrowers select the best loan term
- Mortgage calculators can help know what your down payments would be
- Mortgage calculators can help you know if a house is within your price range
- Mortgage calculators can help you understand all related costs
Mortgage Calculator Seattle
If you are looking to buy a home in Seattle, WA, we recommend doing this entire math. It’s good to know how mortgage rates are calculated. If you need help calculating your down payment and interest rate, the team at Seattle’s Mortgage Broker can help. Call us today at 206-251-0818 for consultation.