Discover These 3 Essential Factors That Go Into Mortgage Calculation

The ultimate dream for many people is home ownership and to get there most people need a home loan. That dream has driven a number of people into madness and others into unscrupulous means to own a house. The easiest way, however, to own a house is through taking up a mortgage.

This is the best way for most people who don’t have a few hundred thousand dollars to buy their home upfront. In fact, most people cannot just put down cash for a home and even those who can don’t usually opt for that route. 

A mortgage allows you ample time to be able to own the house and pay it off in time. The problem for most people is they don’t know what it takes to calculate their mortgage, leading them to sign up to bad mortgage deals. Up next we tell you what factors play a part in your mortgage calculation. 

Credit Score & Down Payment

One of the major factors that you have to look into when you consider taking a home loan is your credit score. And not only that, the amount you’re willing to put as a down payment also comes into play. First, your credit score can help you determine how much you pay as it plays a role in how much interest you’ll pay.

The lower your score the higher the interest rate you’ll have to pay. Before you take up the mortgage, try and build your score as much as possible to get the lowest interest in your mortgage. 

The next part is make a large down payment on your mortgage if you have a low or high interest rate. A large down payment ensures that get a lower interest rate for your mortgage. Around 20% of the value of the house is the most ideal down payment you can make when you’re taking up a mortgage.

Your mortgage insurance will also be determined by your credit score.  

Home Price & Amount

The mistake that you’re likely to make when you think of taking a loan is not doing research on how much the houses cost in the area you are looking. You’ll get a high cost if you don’t look into it and hence a high interest. The high interest is likely to be driven up by the loan amount you take to get the house. 

Taking up a high mortgage will drive up the amount you pay up in the end. Do your research by consulting real estate websites to get more info on the cost of the houses in your desired area. That ensures you can reduce the loan amount that you’ll require to buy that house you want. 

Loan Term

It is general knowledge that the longer your loan term the higher you’ll have to pay for your homeloan. For example, if you take a loan of $10,000 for 12 months at a rate of 10% interest, you’ll have to pay $1000 in interest. With this one you’ll only have to worry about the short term interest.

On the other hand, if you take the same loan for a longer period at the same interest for say 24 months, you’ll pay up to $2000 interest. Before you take up a mortgage, calculate how much time you’ll need to pay for the loan. 

It can be the difference between paying your loan on the cheap or expensive in the end. It won’t matter much the down payment of the mortgage you take up if you don’t take into consideration the term of the loan you’ll be taking up at the end of your mortgage. 



Getting a mortgage can be made easier if you know the right information. Take into consideration all the factors that go into mortgage calculation so you can do your best to resolve any issues before you apply for one.