That’s easy principal and interest right? Wrong. Many mortgage calculator sites let you plug in a loan amount and interest rate and spit out a low monthly payment figure. Next to the figure there should be a few ** for fine sprint.
The bulk of your monthly loan payments will go towards paying off principal and interest which is amortized. Amoritization is the payment of a debt in installments over an agreed-upon period, during which principal and interest are paid off. The formula for which looks something like this;
Wait…dont run away. Your lender can help you figure this out. Basically you are taking the interest for the entire life of the loan, plus the amount you are borrowing, and dividing that by the total number of payments you will make.
A quick example: a $175,000 loan with 6.5% interest rate for 30 years. The interest over the life of the loan would be $223,202 and the total interest plus the amount you originally borrowed would equal $398,202. If you take that number and divide it by the total number of payments you would make (360) your monthly payment would be $1,106. This is not your final payment figure however.
Ok now that I fried your brain with some math once you figure out the monthly loan and interest payment…. you add in the taxes based on your local area, and your Home Owners Insurance. I will spare you all the formulas involved in that. Just remember PITI.
