How Are Mortgages Calculated

How Are Mortgages Calculated?

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Mortgages are calculated based on a number of factors, including your income, credit score, and the type of mortgage you choose. The main factors that affect your mortgage payment are:

*Loan amount:* The amount you borrow will have a big impact on your monthly payment. The more you borrow, the higher your monthly payment will be.

*Interest rate:* The interest rate is the amount of interest you pay on the loan. The higher the interest rate, the higher your monthly payment will be.

*Term:* The term is the length of time you have to repay the loan. The longer the term, the lower your monthly payment will be, but you will pay more interest over the life of the loan.

*Loan to Value:* The loan to value is the amount of money you put down in relation to the value of the property when you buy the house. The larger the amount you put down, the less you will have to borrow, and the lower your monthly payment. The lender will have has less risk and as a result offer products with lower interest rates. Counter to that, a smaller deposit, as low as 5% attracts the highest mortgage interest rates and as you are alos borrowing more, the monthly payment will be higher.

Your income and credit score will also affect the amount of mortgage you can afford. Lenders will look at your income to see how much you can afford to pay each month. They will also look at your credit score to see how risky you are as a borrower. A higher credit score will mean that you are less risky, and you will likely qualify for a lower interest rate.

There are a number of different types of mortgages available, and the type you choose will also affect your monthly payment. Fixed-rate mortgages have a set interest rate for a product period, usually 2, 3 ,5 or even 10 years which means your monthly payment will stay the same. Variable-rate mortgages have an interest rate that can change over time, which means your monthly payment could go up or down.

Ultimately, the amount of mortgage you can afford will depend on your individual circumstances. It's important to speak to a mortgage adviser to get more tailored advice.