Real Estate Home Mortgages/Mortgage questions
QUESTION: Hi, Joe,
I'd greatly appreciate it if you could answer the following questions regarding mortgage when buying a house.
a) Is this how the monthly mortgage payment should be calculated?
Example for a $250,000 house
Down payment: 20% = $50,000
Remaining principle: $200,000
Interest rate for 30-year fixed: 3.5%
% x $200,000 = $7000 a year
$7000 / 12 months = $583.33/month of mortgage
b) Is $583.33/month all I would need to pay for my house, apart from the low lending fees?
c) If they say that 3.5% is the fixed interest rate for 30-year mortgage for New York, does this mean that it's the average interest rate in NY, or would it be the fixed rate in every town/region in NY? In other words, if Albany had 3.5%, would it be the same in NYC?
d) Can anyone in the family pay for the mortgage, or do they require the owner of the house to do so?
Thank you in advance for your assistance!
ANSWER: Hi Julie,
No. When calculating the monthly payment, it is amortized over 30 years, and includes the principle and interest. In addition, a homeowner must also understand that they have their property tax and homeowners insurance that is added in for qualifying purposes, as well.
The interest rate is determined by the interest rate the bank offers, on the day it is locked in. The locked rate will be the interest rate on your loan. Interest rates are based on the mortgage backed securities market, and fluctuate, daily.
After your loan closes, the lender wants their payment each month, and will accept payment from whomever writes them a check for it.
---------- FOLLOW-UP ----------
QUESTION: Hi, Joe,
Thank you for your reply, which is much appreciated.
Okay, let me see if I understand it correctly; let's say on a $200,000 remaining balance, I'd have to pay $6666.67 a year of the principal during the 30-year term. Then I add to it the home insurance of $800, and town tax of $4000, making it a total of $11466.67/year.
Do I include the school tax?
Do I apply the mortgage interest rate of 3.5% to the $11466.67 to come up with the total of $11868/year?
If not, how do I apply the 3.5%?
What if the home owner is later qualified for the senior or disabilities exemption on their town/school taxes to receive a tax deduction? Would the monthly mortgage payment be adjusted accordingly?
Thank you in advance!
The method you are using to calculate the principle payoff is incorrect. A home loan does not apply an equal amount of the payment to principle every year. Lenders structure a home loan so that in the initial years of the loan, the majority of the payment is applied to the overall interest of the loan, and very little to the principle. As you get deeper into the term, more and more of the payment is applied to the principle.
As far as your property tax is concerned, that is determined by your county tax assessor. If you are entitled to some type of tax deduction at the end of the year, you file for it when you file your taxes each year. Beyond these issues, you should speak directly with a mortgage professional about your particular situation and goals to determine the best possible option you seek.
If you are looking to purchase a home in California, I would be happy to help. Please contact me at 800-785-4952. Good Luck!
Universal Lending and Real Estate