A mortgage is a loan used to finance the purchase of a home when you don’t have the cash upfront to make a down payment. When you buy a home with a mortgage, you agree to pay back the lender the amount of money you’ve borrowed over 10, 15, 20 or 30 years in regular payments. In return, the lender holds your deed to the property as collateral until the loan is fully paid off.
The term mortgage comes from Law French, meaning “death pledge.” It’s a type of debt that enables individuals and families to own homes without having to pay the full purchase price in cash up front. The terms and conditions of the loan are based on the home’s value, as well as the creditworthiness of the borrower.
Mortgage loans come in a variety of forms, including fixed-rate and adjustable-rate mortgages (ARMs). Some are for 30, 20 or 15 years. Some have interest-only periods, where you pay only the interest on your loan. Others have a combination of both, allowing you to save money in the long run by paying off more of your principal than you pay in interest.
In order to get a mortgage, you must be approved by your lender. They’ll do a review of your income, assets, debts and credit profile to determine whether or not you can afford the payments. Your debt-to-income ratio, or DTI, will also play a role in determining the interest rate you’ll be offered for your mortgage.
After you’re pre-approved, you can move forward with the home buying process and start searching for a home. To help you decide on the right home for you, your lender will assign an appraiser to look at similar properties in your area and determine how much a house is worth. This is essential for ensuring you can afford the mortgage payment, as the lender won’t allow you to borrow more than a house is worth.
You’ll also want to consider the monthly costs associated with owning a home, such as homeowners insurance, HOA fees and property taxes. These costs can vary significantly depending on where you live, but they’re usually included in your mortgage payment.
Once you’ve gathered all of the required information, you can input it into our mortgage calculator. Then, the calculator will auto-populate the details of your mortgage to give you a better idea of how much you’ll be expected to pay each month.
The payment breakdown you receive in the mortgage calculator will include your monthly interest rate, mortgage payments and your estimated payoff date. This breakdown helps you crunch the numbers so you can determine if you’ll be able to afford your dream home and what you should do to pay it off sooner.
Using our mortgage calculator can save you time and hassle when shopping around for a new home. It can also help you decide if you should make a larger down payment or switch to an adjustable-rate mortgage so you can save on interest over time.
