Frequently Asked Questions
How should I use this mortgage calculator?
A home is one of the largest purchases many people will make in a lifetime. It is important to be able to calculate what your payments will be as well as how much you can afford. This calculator should be used to get an estimate of how much your mortgage will cost over the life of the loan. You can also change your figures to see how much you will pay if you add additional payments outside of the regular monthly payment.
How do I calculate mortgage amount?
There are several ways you can calculate your mortgage amount. If you have a specific home in mind, you can use the selling price as a starting point. You may end up with an amount that is less if you negotiate a lower price with the seller.
You can also seek pre-approval from us. We'll be able to tell you exactly how much we're willing to lend you for a home based on your income, credit score, and other factors. You can enter this amount into the mortgage calculator tool in order to see how much your payments will be.
If you have not been pre-approved for a mortgage and do not have a home in mind, do some research into the market in which you plan to buy. Decide on the type and size home you want to purchase and find look at what homes are selling for in that area. This will give you a base idea of how much your loan should be.
What determines the loan term?
A loan term refers to the frequency of payments on a loan. Most mortgages have a loan term of 30 days, or one month. We'll be able to determine your loan term.
However, you have the option to make additional payments each month above your regular scheduled payment. Our calculator can help you determine how much more quickly you can pay off your loan if you decide to make two or more payments a month, thus saving you interest.
Which interest type is better?
The interest type of the loan is ultimately going to depend on your personal preference. There are pros and cons to both types of loans. A variable interest rate is a loan that is charged interest on the outstanding balance based on the current market interest rates. A fixed interest rate is a loan that has a constant interest rate that doesn't change over the life of a loan.
A variable interest rate loan is ideal if the market conditions remain low or unchanged. The downside to a variable rate is a much higher interest payment should the volatility of the economic climate becomes increased. However, studies show that over time, the borrower will likely pay less interest with a variable rate.
A fixed rate loan is defined as a loan that retains the same interest rate during the entire amortization period. The benefit to this is the fact that your payment will never be any higher. On the contrary, your payment will never be any lower as can often happen with variable interest rates.
How much do interest rates vary?
Mortgage interest rates can vary dramatically. Your interest rate will be dependent on your credit history, your income, and your debt-to-income ratio. Rates also will vary among different lenders in different regions. Your down payment will also have an impact on your interest rate. Rates can vary from just over 1% up to 7% and sometimes even higher.
In a variable interest mortgage, how much movement will I see?
The amount of movement you will see with a variable interest rate will heavily depend on the economic climate during the life of your loan. When interest rates change, your payment will either go up or down. In some cases, your payment may stay the same when market interest rates go down. If this happens, that only means that more of your money will go towards the principal portion of the loan, which is an ideal situation. There is no real way to fully predict how much movement you will see on your rates, but you can get an idea when market rates are forecasted.
What happens next?
Now that you know what to expect with regard to your mortgage payment, the next step is to apply for your loan. We'll provide you with information that will tell you how much you will qualify for. You will then be able to begin searching for your dream home in your price range.