How to Figure a Mortgage Payment for Your New Home


It is just about every adult's dream to own his very own home. However, due to many practical constraints, the only way for a regular earner to own a home is by obtaining a home loan or mortgage. A home mortgage is a loan you apply for in order to pay for your house and/or the land it stands on. The same property is considered as the collateral for the loan, which means that your lender can take away your home if, for any reason, you become unable to pay for the monthly repayments due you.

In order to own and keep your home, it is important that you be able to pay for the mortgage of your home. Thus, before even obtaining the loan, you should have already set your budget and have made sure that you have enough family income to accommodate mortgage payments. How do you calculate and figure out mortgage payments for your home? Here are some tips that can help you get a bird's eye view on how much you will shell out monthly paying for home:

1. Know the three most important pieces information you need: amount of mortgage, loan duration and terms, and interest rate. These three crucial pieces of information should have been made available for you even before you signed the contract. To approximate the monthly amortization or monthly payment, you will need to follow the formula below:

M = P [ i(1 + i)n ] / [ (1 + i)n - 1]

So if you borrow $100,000 on a home loan at an annual interest rate of 5% spread over 20 years, following the formula, you can expect a monthly amortization of $660. Of course, if this formula is too much to handle, you can always ask for an estimate from your real estate agent.

2. The mortgage payment usually not inclusive of possible property taxes to be imposed on your new home and the cost of homeowners insurance. Other costs may include private mortgage insurance and association dues. Check with your local revenue office and your real estate agent to find the exact figures of these payment extras. This can amount to a few hundred dollars to a few thousands yearly, depending on your property. With the figures above, you might have to pay roughly $900 per month for 20 years.

3. If all else fails and all the figures seem confusing, use a mortgage calculator. There are mortgage calculators and tools found online that can help you estimate your monthly amortization. You will need to provide the basic figures for a more correct estimate.

Despite the initially overwhelming cost, remember that your home is the most important investment you can make. If you are armed with the right knowledge, then you would know how to properly budget your family income to make way for your monthly mortgage repayments. That said, good luck with your new home!

The author of this article has expertise in Austin homes. The articles about Round Rock real estate reveals the author's knowledge on the same. The author has published many articles in his Austin real estate blog as well.
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