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How to Calculate Mortgage Payments

Calculating your mortgage payments is sometimes very simple. The difficult part is calculating the interest that is tacked on with the mortgage payment. Like all things that happen in life, there is a choice with what kind of interest rate you can get when you purchase a house. The first is a fixed interest rate, where you can choose the rate of interest that you will be paying on your home, and this rate will never change over the life of your home loan. The other interest rate is what is called an adjustable or fluctuating interest rate. This type of interest rate is more difficult to calculate your monthly payments. The reason why this interest rate is much more difficult is due to the fact that it is constantly changing. The change is dependent on the economy and how often it is changing and shifting. If the economy is doing well and the inflation is high, often times you interest rates will decrease. On the contrary your interest rates could increase if it is a bad time of the year, month, or season. Your monthly payments can be calculated easily once you find out if you have a fixed or adjustable interest rate. The rate and the amount of the loan determine what your monthly payments and your interest charges are going to be. And the rate and loan amount, in turn, are affected by several factors. The rate depends on your credit score, discount points you pay, and whether the down payment is less than 20%. The loan amount depends on the size of the down payment and the home's price. Not coming up with 20% of the homes price will tack on another cost of mortgage insurance witch is just going to have you pay more over time. Lenders offer numerous special loan programs that allow small down payments or feature other benefits. Some target first-time home buyers while others primarily help people who don't make much money. If this is a way that will truly help you afford the house that you want then it might be a good idea, but in the long run low down payments often cause you to pay longer over the period of the loan. When people want to find out how much their mortgages cost, lenders often give them quotes that include both loan rates and "points." A point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent, but come with a charge of 1 point, or $1,500. Be careful and pay close attention to these points on your mortgage because they could have a major affect on what you are paying. You must also understand that there are good points and bad points. Good points or discount points are actually prepaid interest on the mortgage loan. Paying the points drive down the interest rate causing less to be paid over time. Bad points or origination fees are charged by the lender to cover the costs of making the loan. Be sure you understand and ask questions about what these fees are and where the money is going because some fees might not be made too clear. If you plan on staying in your house for a while then it might be in your best interest to pay points early on rather then paying more interest later on down the road.
National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 8, 2012