About Mortgage Calculations
A mortgage is a loan used to purchase a home or real estate, where the property itself serves as collateral. The calculation determines your monthly repayment amount, which is primarily composed of principal (the borrowed amount) and interest (the cost of borrowing). Understanding your mortgage is key to long-term financial stability.
Key Terms and Definitions:
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Principal: The initial amount of money borrowed.
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Interest Rate: The rate charged by the lender, expressed annually. This is the fee for using the borrowed funds.
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Loan Term: The duration, in years or months, over which you agree to repay the loan. Common terms are 15 or 30 years.
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Amortization: The process of paying off debt over time in fixed installments. Early payments are mostly interest, while later payments are mostly principal.
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Property Tax and Insurance (Escrow): Additional costs often bundled into the monthly payment, allowing for a more accurate picture of the total monthly obligation.
This Mortgage Calculator helps you determine the fixed monthly payment required to fully pay off a loan over a set term. By adjusting the loan amount, interest rate, and term, you can quickly analyze how these variables impact your budget and total cost of borrowing. The Amortization Schedule provides a detailed, month-by-month breakdown of how much of your payment goes towards interest and how much reduces your principal balance.