## What is Mortgage?

A mortgage is a loan in which real estate or property is used as security. The borrower and lender (usually a bank) enter into an agreement wherein the borrower receives cash and payback within a decided timeframe until he pays back all to the lender.

## How Does Mortgage Calculator Work?

You do not need to care when this simplest Mortgage Calculator in your hand. Go to MortgageCalculator.tech and just enter the mandatory values we asked for - Principal amount (Loan Amount), Downpayment (optional), Current Interest Rate (Percentage), and Years (number of years to repay the loan). After filling all the required details, press the "Calculate Mortgage" button.

The result will appear within a few seconds in the right panel of the screen with Monthly Mortgage Amount, The Total Interest Amount, and The Total Amount After Interest for Mentioned Years.

## Formula to Calculate Mortgage Payment:

You can calculate monthly mortgage payment without including taxes, and any insurance using the following equation:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

P = principal loan amount

i = monthly interest rate

n = number of months ordered to repay the loan

Once, You calculated the M (Monthly Mortgage Payment) you can add-in homeowners insurance premium and property tax if you have them.

## The Input Values:

If you choose to calculate by yourself, start by gathering the information needed to calculate your payments and understand the other aspects of loans. The letter in crotchets tells you where we'll use these values in calculations (if you choose to calculate this yourself, but you can also use mortgage calculator online):

1. ##### The Loan Amount: [P]
or Principal which is the price of the home minus the down payment. Although other charges sometimes added to the loan amount.

2. ##### Interest Rate: [i]
Interest rate on the loan. But be aware that the interest rate is not Apr (annual percentage rate).

3. ##### The number of Years: [t]
The number of years you have to repay your loan, also it is called a term.

4. ##### Number of payments per year: [n]
That would be 12 for monthly payment (12 payment per year or 1 payment per month).

## How Do Mortgage Work?

Mortgage loans occur when homebuyers purchase a home without enough cash in hand. They are also used to borrow loans for other purposes using their house as collateral.

There are several types of mortgages and buyers should assure which one is suitable for their situation. Types of loans are categories by there term date ( usually 5 to 30yrs and some lenders offers up to 50yrs term), Interest Rate (can be variable or fixed), and the amount of payment per period.

[If you are ready to buy home use our Mortgage Calculator to know what is your monthly principal will be.]

A mortgage is like other financial products where its supply and demand changes in financial conditions. Sometimes, the bank offers low-interest rates and sometimes very high-interest rates. If borrowers agreed with the high-interest rates and after some years interest rates dropped then the borrower can sign a new agreement with the new interest rate policies -- after jumping through some hoops, of course. This is called Refinancing.

## Why do Mortgage Matters?

The Mortgage can make large payment possible, even if not much cash in our hand to purchase an asset like house upfront. Lenders take a risk in sense he doesn't have a guarantee that borrowers will pay off in the future or not and borrowers will be able to pay in the future. Borrowers take a risk in accepting these loans, as a failure to pay will result in a total loss of the asset.

## Applying for mortgage

Applying for a mortgage is a 2 stage process. At stage one lenders ask you about how much you can afford and what type of mortgage is suitable for you.

The second stage is where the mortgage lender will conduct a more comprehensive affordability check, and if they haven’t already demanded it, evidence of income.

Stage1: Generally, lenders will ask you about what kind of mortgage you want and how long you want it for. They will also try to know about your financial state without going in detail. This is generally used to indicate how much a lender might be prepared to lend you.

Stage2: This is stage begins when you start the process of applying. This could involve some thorough questioning of your finances and plans that could impact your future income. They’ll also estimate the impact on your repayments should interest rates grow in the future. If your application has been approved, the lender will present you with a ‘binding offer’ and a Mortgage illustration document(s) describing terms of your mortgage.

## What is the Total Interest You pay?

To find out the total interest you will pay after the interest rate, it can be calculated by a simple mathematical formula. And, yes you do not need to calculate it manually if you are on this website. We show this amount at the end of your calculation so, it will help you to check and compare interest rates between various lenders to choose in between them.

With the help of the below method you can calculate the total interest:

M = Monthly Mortgage
n = Number of months to repay
P = Principal Amount (Loan Amount)

Consider the Principal Amount 10,000 \$, Monthly Mortgage you pay is 69.92 \$ and number of months to repay is for 20yrs so,
n = 20 x 12 = 240 months
Therefore,
Total Interest Amount = ( 69.92 \$ x 240 ) - 10,000 \$ = 9,334.4 \$

## What is private mortgage insurance?

PMI Private mortgage insurance is a kind of mortgage insurance you might be expected to pay for if you have a conventional loan. Like other sets of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan. PMI is provided by a private insurance company and arranges by the lender. PMI is usually needed when you have a conventional loan and make a down payment of less than 20 percent of the property purchase price. PMI is also usually required when you’re refinancing with a conventional loan and your equity is lesser than 20 percent of the value of your home.

What factors should I consider when deciding whether to pick a loan that requires PMI? Like other kinds of mortgage insurance, PMI can help you qualify for the loan you usually unable to get. But it can increase the cost of the loan. But it doesn't protect you if you're running into the problem of mortgage, it just protects the lender.

Lenders sometimes offer standard loans with smaller down payments that do not require PMI. Smaller down payment increases the interest rate. You may also require to ask a tax advisor about whether paying more extra in interest or paying PMI might affect your taxes differently. Borrowers making low down payment may also consider other types of loans. Other types of loans may more or less expensive than available loans of PMI. It depends upon your credit score, your down payment, and general marketing conditions.

You may also consider saving 20 percent of down payment to pay. Because when you pay 20% of down payment, PMI is not required with a conventional loan. You probably receive less interest rate also. So, always ask the lender to show other options to receive lower interest rates.

Working out what you can really afford Don't stretch if you think you will struggle for repayments. Also, think about the operating costs of owning a home such as household bills, insurance, council tax, and maintenance.

Lenders will want to see your accounts if you have any existing loans. Lenders will want proof of your account there. They might ask you for information about household bills, child maintenance, and other personal expenses. Lenders want a proof which explains you are financially ready to keep up repayments if interest rates rise. Lenders can refuse if they find you are not able to keep up repayments.