Question:

How do we learn how to calculate monthly mortgage payment?

Answer:

A website or a mortgage calculator can certainly do the job. But even if you will be using one, you will need certain information about the loan and also know how to calculate monthly mortgage payment. Even if you have not been approved for a loan yet, it will be useful to have an idea of how much you will have to pay monthly.

The first thing to know will be the loan amount. You should figure out a number that you consider realistic to be approved for. You will also have to know your LTV ratio. The loan to value ratio is important as if you are putting less than 20 percent down payment (that is, LTV higher than 80), you will need to fit a PMI (private mortgage insurance) into your calculations.

To calculate your mortgage payment you will need to know also the annual taxes on the property, the amount of your homeowner's insurance, as well as the interest rate and principal. It will also be useful to know what loan plan you are applying for. If you are planning on interest-only, your principal will have to be excluded for now. Also, since you cannot know the rates you will be approved of in advance, and since even small variations on the interest rates can make a huge difference, you have to know that you will be making quite a rough estimate.

However, after you have determined the annual amounts to pay for principal and interest rate, taxes and insurance, and the annual amount for PMI (if any), add them together and divide by 12. This will represent a rough estimate of your monthly payment.

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