![]() In essence, the lender helps the buyer pay the seller of a house, and the buyer agrees to repay the money borrowed over a period of time, usually 15 or 30 years in the U.S. Each month, a payment is made from buyer to lender. A portion of the monthly payment is called the principal, which is the original amount borrowed. The other portion is the interest, which is the cost paid to the lender for using the money. There may be an escrow account involved to cover the cost of property taxes and insurance. The buyer cannot be considered the full owner of the mortgaged property until the last monthly payment is made. In the U.S., the most common mortgage loan is the conventional 30-year fixed-interest loan, which represents 70% to 90% of all mortgages. Mortgages are how most people are able to own homes in the U.S. Mortgage Calculator ComponentsĪ mortgage usually includes the following key components. These are also the basic components of a mortgage calculator. Loan amount-the amount borrowed from a lender or bank.In a mortgage, this amounts to the purchase price minus any down payment. ![]() The maximum loan amount one can borrow normally correlates with household income or affordability. To estimate an affordable amount, please use our House Affordability Calculator. Down payment-the upfront payment of the purchase, usually a percentage of the total price.This is the portion of the purchase price covered by the borrower. Typically, mortgage lenders want the borrower to put 20% or more as a down payment. In some cases, borrowers may put down as low as 3%.
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