How to Calculate Your Monthly Loan Payment

How to Calculate Your Monthly Loan Payment

How to Calculate Your Monthly Loan Payment Ever wondered what all those numbers mean when applying for a mortgage? Take a look and see how you can use those numbers to calculate your monthly payment! When comparing loans across lenders, you may ...

How to Calculate Your Monthly Loan Payment

Ever wondered what all those numbers mean when applying for a mortgage? Take a look and see how you can use those numbers to calculate your monthly payment!

When comparing loans across lenders, you may want to look at all costs, not just the interest rate. The annual percentage rate (APR) tells you the estimated cost of your loan, which includes the interest rate and other upfront fees that you pay for the loan (such as discount points and origination fees). The APR is based on the assumption that you’ll keep the loan for its entire term to compare loans of the same type and length.

When comparing various home loan offers, you want to focus on the costs that are controlled by the lender. Every lender has different loan programs and costs, so it is important to look at all of these numbers– not just the quoted interest rate – to help determine which offer is the best deal for you. Here are some of the items whose price is determined by the lender.

Interest Rate – The interest rate is the cost of borrowing money and is used to calculate your monthly mortgage payment. The higher the interest rate, the higher your monthly payment will be, and vice versa.

Discount Points – This is an up-front fee that you can choose to pay if you want to reduce the interest rate on your loan. Buying discount points make sense if you plan to stay in your home a long time, as the money you save on interest payments over the life of your loan will be greater than the one-time fee you pay.

Origination Charge – This is a fee for processing a mortgage application, pulling credit reports, verifying financial information and creating a loan.

Rate-lock Fee – If you choose to lock in your interest rate beyond a certain period, you may pay a fee at the time of closing.

Other Fees – Other fees controlled by the lender include a document preparation fee, processing fee, application fee and underwriting fee.

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