Most people pay off the cost of a home they have purchased by monthly installments. It is rare for someone to have the financial capacity to pay the whole sum upfront! Homebuyers usually pay a lump sum of money upfront and split the remaining amount of money borrowed into smaller chunks that the individual can pay off on a monthly basis. Here are some things you have to know when calculating your mortgage payment!
Original price, lump sum paid, interest
Original price refers to the initial and original cost of the home. If a home is listed as sixty thousand dollars, it means that the original price of the home is sixty thousand dollars.
Lump sum paid refers to the down-payment that the buyer pays upfront as a deposit. The buyer may pay twenty thousand dollars upfront, thus decreasing the outstanding amount to forty thousand dollars. These forty thousand dollars will be split into smaller chunks that are to be paid off as monthly installments.
Interest refers to the percentage of the total amount borrowed that the bank charges for the service of paying the full price of an apartment for you. For instance, a 3 percent interest rate will translate a 40,000 dollar loan to a 41,200 dollar loan.
Calculating mortgage payment
The first step is to deduct the down-payment or deposit you have provided to the bank. You are now left with the remaining amount that you will have to pay in weekly or monthly installments. You will now have to make a decision on how long will the repayment period be. Keep in mind that the longer the period is the more money you have to repay due to the interest rate. It is best to keep the repayment duration as short as possible. Finally, add in the interest rate and you will get an idea of the final sum of money you have to pay in total. Divide the amount by the number of repayment months and you now have the sum of money that you need to repay per month.