Q1: How is my monthly mortgage payment calculated?
Your monthly mortgage payment is calculated using the amortization formula that accounts for the loan amount, interest rate, and loan term. The payment includes both principal (the amount borrowed) and interest (the cost of borrowing).
Q2: What is the difference between a 15-year and 30-year mortgage?
A 15-year mortgage has higher monthly payments but significantly less total interest paid and builds equity faster. A 30-year mortgage has lower monthly payments but more total interest paid over the life of the loan. Choose based on your financial situation and goals.
Q3: How much interest will I pay over the life of my mortgage?
The total interest depends on your loan amount, interest rate, and term. Generally, you'll pay more in interest than the original loan amount over 30 years. Making extra payments or choosing a shorter term can significantly reduce total interest paid.
Q4: Can I afford a mortgage with my current income?
Lenders typically recommend that your monthly mortgage payment should not exceed 28% of your gross monthly income. However, you should also consider other debts, expenses, and financial goals when determining affordability.
Q5: What factors affect my mortgage interest rate?
Your credit score, loan-to-value ratio, loan term, loan type, and market conditions all affect your interest rate. Higher credit scores and lower loan-to-value ratios typically result in better rates. Shop around and compare offers from multiple lenders.
Q6: Should I make extra payments on my mortgage?
Making extra payments can significantly reduce total interest paid and shorten your loan term. However, consider your financial priorities - if you have high-interest debt or need to build emergency savings, those might take priority over extra mortgage payments.