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How to Calculate a Mortgage Payment


Payment is usually made on a once-monthly basis. Paying the specicific amount required will ensure the mortgage owner maintains an excellent overall credit rating. Several factors are involved to calculate a mortgage payment. But the calculation is not as difficult as it may seem to the novice.

Factors Involved In Calculating A Mortgage Payment:

Most every real estate loan, including mortgages, have actuarial and mathematical tables that are pre-calculated for every possible amount. The elements used in calculating each regular mortgage payment consist of the total loan sum, the term, and the interest rate. The total loan sum is the amount of the total mortgage that is being amortized (spread out over the course of the mortgage). The mortgage term consists of the period, usually in years, that the real estate loan is being carried. And the percentage rate is either a fixed or a variable (changing) numerical figure that completes the calculation picture of the mortgage. These three factors — the total amount, the term, and the percentage rate — are cross-referenced in the written amortization tables, which you can obtain from a lender or by purchasing in the real estate section of a bookseller. Terms for mortgages are calculated and spread out from anywhere from one year to usually 40 years. Interest rates can start as low as about three% and shoot well up into the high 20%ish range.

How to Have the Lowest Mortgage Payment:

The surest way to have and calculate the smallest fixed-term mortgage payment is by getting the lowest total amount financed, combined with the longest term and the lowest interest rate. A low mortgage amount keeps the overall payment low because so little is being financed. A longer term allows a mortgage holder to spread out the total payment over a lengthier period; this also keeps the mortgage payment down.

Specific Examples of Calculating a Mortgage Payment:

Here are a few specific examples for clarification purposes. A $100, 00 mortgage loan at 5% extended to exactly 30 years results in a payment of $536.82 per month. That same $100,000 at the same 5% but extended to only 15 years would be calculated at a higher fixed monthly rate, or $790.79. The higher payment is due to the term being shorter by exactly 15 years.

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