How to Calculate Mortgage Rates


If you have a fixed-rate mortgage, you know your payment for the term
of the loan. However, if you have an adjustable-rate mortgage, your
rate is subject to changes over the life of the loan as the market
rate changes. When calculating your new mortgage rate, you need to
know the margin and your interest-rate index. The margin is the amount
that your lender adds to the interest-rate index. It's based on your
creditworthiness and is set at the time you take out the loan. The
interest-rate index changes with market conditions, but the particular
index used may vary from lender to lender. Usually, lenders use the
cost of funds index, London interbank offered rate or one-year
constant-maturity T
The mortgage interest rate that you pay can make a significant
different in the amount of interest paid over the life of the loan.
Lenders base the interest rate that you pay on market factors, such as
the return on a Treasury bill, as well as individual factors is the
risk of a loan. These personal factors include your credit score and
debt-to-income levels. To calculate your mortgage at different rates,
you need to know the amount you are borrowing, the term of your loan
and the different interest rates you want to calculate your mortgage
at.Difficulty:Moderately EasyInstructions Things You'll
Need
Calculator

Determine the amount of money
that you need to borr

Personal Finance
The overall cost of a residential mortgage is heavily affected by an
interest rate. Lenders use many different factors to calculate the
interest rates they offer to individual borrowers such as the
borrower's financial situation, the mortgage terms and boarder
economic influences. Credit HistoryThe borrower's credit history
and financial situation helps lenders calculate the mortgage rates
they offer. Borrowers that are perceived as high risk due to poor
credit history or low income are likely to face higher interest rates
than borrowers that have paid off bills and other debts on time and
have higher incomes. If you currently carry a large amount of debt,
the interest rates you face on a
Personal Finance
Your mortgage rate, or the monthly amount you owe on your home loan,
is determined by a number of variables. The type of interest rate,
whether fixed or variable, is probably the most important. In
addition, you must include the loan amount and the length of the
mortgage you agreed on. The latter is usually expressed in years, with
30 being a standard term. With these variables you may construct a
simple algebraic equation to find your monthly mortgage
rate.Difficulty:EasyInstructions Things You'll
Need
Calculator

Write the standard mortgage
formula. Standard monthly mortgage rates are written as M = P [ i(1 +
i)^n ] / [ (1 + i)^n - 1]. Define the variables: M =

Personal Finance
Most American mortgages rates amortize annually, meaning once a year.
If the mortgage is for $100,000 and the interest rate is 6 percent, at
the end of one year (if no payments are made) the interest is $6,000.
Most mortgages, however, require payments each month, not just once a
year. This causes the amount financed to change each month as the
principal paid reduces the loan amount. Converting the interest rate
to a monthly rate can help with tracking how much interest should be
due as payments are made each month.Difficulty:EasyInstructions
Things You'll Need
Current mortgage note
Calculator
class="error">Converting Your Annual Rate to a Monthly RateExamine
your mortgage
Personal Finance
Mortgage payments can be calculated for any type of rate that is
applied to the mortgage loan. Most all types of mortgage loans have a
percentage rate that is compounded annually. This means that you will
need to determine how much you will pay each month for the amount of
the mortgage. You can calculate the mortgage percentage rate payments
using an online calculator, or you can calculate the payment
manually.Difficulty:ModerateInstructions Things You'll
Need
Paper and Pencil
Calculator

Online
CalculatorGo to an online calculator, such as the one provided by
Bankrate (see Resources).
Enter the amount for the mortgage in the
"Mortgage amount" field.
Ent

Personal Finance
Refinancing a mortgage allows homeowners to shorten a loan term or
secure a lower interest rate. A lower interest rate will decrease
monthly payments and reduce the total cost of financing. Shopping for
the right interest rate and loan term is important when refinancing a
home. Once you have this information, you can determine the monthly
payments associated with the mortgage interest
rate.Difficulty:ModerateInstructions Look for the amount owed on
the mortgage. This can be found on the first page of the mortgage
statement. You can also contact the lender to find out the amount
owed.
Find the right mortgage term. When refinancing, you can
choose a variety of terms, from 15 to 45 years.
Personal Finance
Mortgage insurance is insurance coverage that protects the mortgage
lender against losses in case the borrower defaults on payments. Years
ago, home buyers had to make at least a 50% down payment when buying a
home. The use of mortgage insurance has revolutionized home buying by
allowing a borrower to put as little as 3.5% down (for an FHA loan),
and sometimes even less. In conventional lending (Fannie Mae/Freddie
Mac) no mortgage insurance is required with a 20% down payment, but
lower down payments will require private mortgage
insurance.Difficulty:ModerateInstructions Things You'll
Need
Calculator
Correct loan amount
Rate for mortgage
insurance

Personal Finance

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