How To Calculate Interest On A Mortgage
Do you know how to calculate interest on a mortgage and how to utilize this to your advantage? You might want to do more due diligence in determining what makes up a higher interest rate vs a lower one. The par rate might not be the end rate that you get, as you may want to customize your rate a bit more.
However, the interest rate varies and there are a few factors that affect it. Your credit rating, or creditworthiness, is one of these factors. A good credit rating makes it easier to borrow money and will likely lead to you getting a better interest rate. Your current income can also affect the interest rate that you are offered. Questions to ask are, what is your employment status, how much money do you want to put down or that is required? What type of home is it and will it be your primary? All these factors can play a part in your interest rate, especially the difference between an arm rate and a fixed rate.
Understanding how to calculate the interest that you will pay on your mortgage is key if you want to plan your finances.
The basic method for calculating the interest on your mortgage is to use the formula below.
Mortgage Payment Equation=
M = P[r(1+r)^n/((1+r)^n)-1)]
- M = Total monthly payment
- P = Principal loan amount/li>
- r = Monthly interest rate
- n = number of payments (term)
This will give you a monthly payment, based on the assumption that you will pay back the loan within a certain time period. However,there are other types of mortgages that are repaid over various terms and programs such as ARM rate and balloons, so there might be a few extra calculations to take into account how long it will take for your repayments to be completed.
Before you purchase a home on the market and start looking for new properties, get in touch with Mortgage Quote and we can help you calculate exactly how much interest you will owe on your new mortgage. Using this information, you can determine how much you can afford and start getting pre-approved for loans. That way, the whole process will be much quicker and easier and you can put an offer in straight away.