Mastering Mortgage Math: A Step-by-Step Guide to Calculating Your Mortgage with Texas Republic Bank

By: techdev | 1 Apr 2024

Are you considering buying a house this year? If so, are you trying to figure out what your monthly payment will be? It should come as no surprise that the cost of living has been steadily increasing over the past few years. This means that taking out a new mortgage might be more expensive than you originally planned. Taking a proactive approach to calculating your mortgage can help you determine what you can comfortably afford. In this article, we’ll outline a step-by-step guide that you can use to calculate your mortgage payment. Remember, everyone’s situation will be slightly different. For a more precise calculation, reach out to one of our Texas Republic Bank lenders today.


Principal and Interest

The first component of your mortgage is your principal and interest payment. Each month, a portion of your payment will go towards paying down the principal of your loan (the original amount withdrawn). The other portion will go to your lender as an interest payment.

On a $200,000 loan with a 7% interest rate, your combined principal and interest will be about $1,330 per month. Just over $1,160 will be interest payments at the beginning of your loan. As you repay more of your principal, the interest amount will decrease.


Property Taxes

The next component that factors into your mortgage payment is property taxes. Property taxes vary by location and are based on the municipality’s budgetary needs. Nevertheless, about 1% to 3% of your home’s assessed value is common.

The assessed value isn’t the same as the fair market value or purchase price. Instead, the assessed value is determined based on an appraisal by your local municipality every few years. When buying a home, you should be able to see the property tax history. Divide this amount by 12 to get the monthly payment.


Property Insurance

Property insurance is another factor that should be evaluated when calculating your mortgage. Although each insurance agency will have slightly different pricing, most agencies base insurance rates on the fair market value of your home.

The location of your home will also impact your property insurance. For example, homes near the water will have slightly higher premiums compared to homes inland. Take your quoted premium and divide the amount by 12 to get your monthly amount.


Private Mortgage Insurance

Private mortgage insurance is an extra fee assessed by lenders when you put less than 20% down on your purchase. PMI can be around 1% to 1.5% of your home’s purchase price, depending on your lender.

For example, on a $250,000 home, expect to pay about $2,500 a year or $208 per month for PMI. Once you have 20% of equity in the home, you can ask your lender to remove PMI. This can help lower your monthly payment.


Homeowners’ Association Fees

The last factor that can influence your monthly mortgage payment is homeowners’ association fees, also known as HOA fees. These are expenses related to the upkeep of community areas, like a playground or pool.

Not all houses will be in an HOA, but if you are, it’s important to understand the annual cost. It’s not uncommon for HOA fees to be around $200 to $300 per month in Texas. You can get an exact amount by reaching out to the prospective HOA board.


Putting Together the Pieces

Each of these components will need to be added to get to your tentative monthly payment. Keep in mind that your final mortgage payment will depend on your specific situation. For example, you might not live in an HOA or you might be putting more than 20% down to get out of PMI.


Whatever the case, it’s important to be as precise as possible when looking to purchase a home. For more information surrounding your mortgage payment, Reach out to a team member at Texas Republic Bank today.

Download the Article: mastering-mortgage-math


Write a comment