|
|
|
Mortgage
DefinitionsFixed Rate
Mortgage
A fixed rate mortgage has
the same interest rate and monthly payment
throughout the term of the mortgage. The payment
is calculated to payoff the mortgage balance at
the end of the term. The most common terms are
15 year and 30 years.
Interest
Only Mortgage
An Interest Only
mortgage only requires monthly interest
payments. Since you are not paying any
principal, this can lower your monthly payment.
However, since your mortgage's principal balance
is not decreased, you will have a balloon
payment at the end of the mortgage's term. Some
an Interest Only mortgages will also be
adjustable rate mortgages (ARM). An Interest
Only ARM will often have a period where the
interest rate is fixed, and then it is adjusted
annually. This calculator assumes that the
interest rate for your Interest Only Mortgage
remains fixed for the entire term.
Mortgage
amount
Original or expected balance
for your mortgage. Taxpayers can deduct the
interest paid on first and second mortgages up
to $1,000,000 in mortgage debt (the limit is
$500,000 if married and filing separately). Any
interest paid on first or second mortgages over
this amount is not tax deductible. Home equity
loans are limited to $100,000 or the amount of
equity you have in your home. Our calculator
limits your interest deduction to the interest
payment that would be paid on a $1,000,000
mortgage.
Term in
years
The number of years over which
you will repay this mortgage. The most common
mortgage terms are 15 years and 30 years. Please
note that for the Interest Only Mortgage you
will have a balloon payment for the entire
principal balance at the end of the loan term.
Interest rate
Annual
interest rate for each mortgage type.
Prepayment
A monthly
prepayment of principal you would like to apply
to your Interest Only Mortgage balance.
Monthly PI
Monthly
principal and interest payment.
Annual Percentage Rate
(APR)
A standard calculation used by
lenders. It is designed to help borrowers
compare different loan options. For example, a
loan with a lower stated interest rate may be a
bad value if its fees are too high. Likewise, a
loan with a higher stated rate with very low
fees could be an exceptional value. APR
calculations incorporate these fees into a
single rate. You can then compare loans with
different fees, rates or different terms.
Monthly PMI
Monthly
cost of Private Mortgage Insurance (PMI). For
loans secured with less than 20% down, PMI is
estimated at 0.5% of your loan balance each
year.
Discount
points
Total number of "points"
purchased to reduce your mortgage's interest
rate. Each "point" costs 1% of your loan amount.
As long as the points paid are not a broker's
commission, they are considered tax deductible
in the year that they were paid.
Points paid
The
total number of points paid to reduce the
interest rate of your mortgage. Each point costs
1% of your mortgage balance.
Tax
savings
The value of the tax
deduction you receive on your mortgage's
interest and home's property taxes. For example,
if you have $900 in interest and $100 property
taxes per month, the value of the tax deduction
would be $280. (At a tax rate of 28%).
Association and maintenance
fees
Any association fees you are
required to pay with the ownership of this home.
Also include any other maintenance costs you
expect to incur with the ownership of this home
that you are not paying while you continue to
rent.
Monthly
payment
Monthly principal and
interest payment (PI) for the Fixed Rate
Mortgage. This is an interest only payment for
an Interest Only ARM.
| | | | | |
