A 6% Or An 8% Mortgage

Category: Finance, Mortgages.

In today s world, taking out a mortgage is necessary for anyone who wants to invest in real estate or simply wants to put a roof over his head.

By contacting either one, the buyer risks harassment from a realtor who won t let go of a qualified buyer, or a lender who needs to lend mortgage money to stay in business. Usually, to find out what a mortgage payment will be on a particular property, a potential buyer needs to contact a realtor or bank to get a quote. Any buyer in his right mind will only go to one of these salespeople when he is ready to go full speed ahead toward a closing. How do you know what the payment will be on a house a seller is asking$ 250, 000 for when the bank is advertising 30- year mortgages at 7% ? So, what does a person who is in the early thinking stages of buying a home do? By the end of this article you will be making such a calculation in your head. First, remember this: $10, 000 borrowed for 30 years at 7% will require a monthly payment of$ 65So, it stands to reason$ 100, 000 for 30 years at 7% requires a monthly payment of$ 663Also take note you could figure out on a piece of paper with a pencil, $50, 000 for 30 years at 7% is$ 336 Knowing these figures, you automatically know a$ 250, 000 mortgage at 7% for 30 years will require a payment of$ 6630( for$ 100, 000) and another$ 6630( for the next$ 100, 000) and$ 3365( for$ 50, 000) .

You will be sprouting out the answer to complicated home buying scenarios just as fast as you can find the terms on the mortgage and the price on the house. $653 a Month. This means the payment will be$ 1, 6625, really close, or really. A 6% or an 8% Mortgage. A mortgage calculator gives the answer as$ 1, 6626, but for a wild guess, I ll take it. Of course, here you ask, "What if I find a mortgage with a lower interest rate? " Well in that case, remember this, $10, 000 borrowed for 30 years at 6% costs the borrower$ 596 a month. All we had to do was add 2 zeros!

This means a$ 1, 000, 000 mortgage for 30 years at 6% will be 100 times$ 596 or, a monthly payment of$ 5, 990Now, certainly that was easy. Okay, what about if the interest rate is 8% ? So a$ 300, 000 mortgage will come at a cost of 30 times that or, $2, 2040 a month. Here, a 30- year mortgage for$ 10, 000 is$ 738 each month. How About a 71/ 4% Mortgage? Even when this is the case, you still don t need a mortgage calculator. In reality, most times interest rates will not be exactly 6 or 7, or 8% .

If you read about a 30- year$ 260, 000 mortgage at 71/ 4% , for instance, and you want to know what the monthly payment will be, here s what you do. Guess! Are you ready? That s right! You know 7% will cost you$ 653 per$ 10, 000 a month and 8% will cost$ 738 per$ 10, 000 a month. Just guess! You also know 71/ 4 is somewhere on the lower side between 7 and 8 so take a guess how much 71/ 4% will cost per$ 10, 000 a month.

I ll go with that. My guess would be maybe, $650? So, since it is a$ 260, 000 mortgage we re trying to figure the payment for, we will multiply 26( 260, 000/ 10, 000) X$ 65The answer is: $1, 78 When I run$ 260, 000 at 71/ 4% for 30 years through a mortgage payment calculator the answer comes out$ 1, 776So, our answer wasn t precisely right, but it was pretty close. Before the real mortgage payment is determined, the cost of a homeowner s insurance policy and property taxes will have to be calculated anyway. In a case like this, even if we came out with an answer that is$ 20- $30 off, who cares? So, the best anybody can do at this point is guess. Now, you re a human calculator!

There you have it. As long as you re only concerned with 30- year mortgages, and today s going interest rates, which are 6% to 8% , you can figure out mortgage payments in your head, or maybe with just a little help from a pocket calculator. Congratulations!

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