- How is a mortgage payment calculated?
- Mortgage payments are calculated using the amortization formula M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate, and n is the total number of monthly payments. Property taxes, insurance, and PMI are then added to the principal-and-interest payment.
- What is the difference between APR and interest rate on a mortgage?
- The interest rate is the cost of borrowing the principal, while the APR includes the interest rate plus lender fees, discount points, and other closing costs expressed as an annual rate. APR is the better number to use when comparing loan offers.
- How much house can I afford with a $5,000 monthly payment?
- If taxes, insurance, and PMI add roughly $400–$700 per month, a $5,000 total payment supports about $650,000–$720,000 of loan principal at 6.5% on a 30-year mortgage. Lenders typically cap your total housing payment at 28% of gross monthly income.
- Is it better to put 20% down on a house?
- Putting 20% down eliminates private mortgage insurance (PMI), lowers your monthly payment, and reduces total interest paid. However, it ties up more cash and may not be optimal if you could invest that money at a higher return than your mortgage rate.