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How Home Mortgage Interest is Calculated & Why You Need to Know
With mortgage interest rates dropping to historical lows, investing in a new home seems like a no-brainer.
Like many buyers, you want to seize the opportunity before it’s too late. You’ve found a loan that suits your budget, and the rest seems pretty straightforward, right?
Not quite. Because ultra-low interest rates are so attractive, many people fail to realize how mortgage interest rates are calculated.
Unexpected fees could mean thousands of dollars out of your pocket and into the lender’s.
So, stick around as we explain how mortgage interest rates are calculated, the fees you may not be aware of, and what you can do to keep your new investment—and your finances—from becoming a nightmare.
Lenders run on your interest payments. That’s how they make their money.
When you decide to take out a mortgage, the lender is taking a risk to issue the loan. So, the lenders charge interest, which you then have to pay back plus the cost of the loan itself.
First, you’ll need to receive a mortgage pre-approval from your bank. After a review of your credit score and other financial documents, you’ll receive an initial estimate of your interest rate and your loan amount (a.k.a. the principal payment).
Keep in mind, this estimate is not a final determination, and your interest rate may increase once other fees are included.
Your initial interest rate estimate is determined in part by your down payment. The minimum payment for mortgage loans is typically 20% of your loan.
This estimate depends heavily on your credit score too. Generally, if your credit score is higher your interest rate will be lower.
A lower credit score usually means you’ll pay a higher interest rate, and even higher monthly payments to your lender.
So, let’s say you take out a $350,000 loan at a 3.0% interest rate. Even with a 20% down payment of $70,000, your total payment over a 30-year period will amount to $534,600.
When your mortgage payments finally end, you’ll have paid about $184,693 to the lender on top of your initial loan!
And if you have a bad credit score, you can expect your interest payment calculation to be much higher. On a mortgage payment with a 600-629 credit score, the interest you’ll pay skyrockets to an estimated $269,181.
(Extra Fees and Other Considerations)?
That’s an awfully high payout for the lender, right? Well, you’re not done handing over your cash yet.
On top of the hundreds of thousands of dollars you may have to pay in interest, lenders include other factors that can drive up your interest rate even further.
Take another look at what you’ll actually pay.
Even with an interest rate that seems affordable, your total cost could be through the roof. This is due to the loan term.
Sure, you’ll end up paying smaller monthly payments with a long-term loan, but all that interest adds up.
So, a 15-year loan term must be the better option then—a shorter term means less time for interest to accrue and less interest for you to pay off later, right?
Unfortunately, it’s not that simple.
Monthly payments for 15-year terms are often 50% higher than long-term loans.
The fact is, life is unpredictable. We can’t predict what expenses might appear next. And paying off an expensive mortgage means less money in your account for emergencies.
There’s a lot more to your mortgage interest rate calculation than finances and a credit score. Buying a house is a real challenge, and loan lenders don’t make things any easier…
Securing a loan and navigating the complex world of mortgage interest rates can seem impossible, especially while working full-time and supporting your family.
Plus, by the time you’re done studying the ins and outs of interest rate calculations and home mortgages, interest rates may be on the rise once again.
In a housing market that can change at any moment, we understand you want to spend less time researching interest rates and more time finding the perfect home.
And we’re prepared to help you get there.
How is any of this going to help me save money on my interest rate?
Fortunately, the answer to your question is not picking up another job or two. And it isn’t saving up for years to afford mortgage payments on the home you’ve always wanted.
The solution is called the Money Max Account, and it has helped thousands of home buyers save tens and even hundreds of thousands of dollars in interest payments.
Developed by United Financial Freedom (UFF), the Money Max Account has helped keep over $2 billion out of mortgage lenders’ pockets so far!
The UFF Money Max Account is like a virtual financial advisor
No, it’s not too good to be true.
The Money Max Account takes the guesswork out of your home loan payments. And it can help save you thousands in the process.
By keeping track of all your finances in one central location, the Money Max Account adapts to changes in your expenses and provides guidance on how to manage your money so you can be debt-free as soon as possible.
When you make a purchase or receive a paycheck, The Money Max Account provides you with an updated debt-free date and what you’ll save on mortgage interest payments.
If it finds any unused cash in your accounts, it will let you know which debts need to be paid, and how much to pay, providing you with the most efficient, stress-free path to a debt-free future.
The Money Max Account is like your own personal financial advisor. It works 24/7 to help get you out of debt and towards a better financial future.
And the best part? Money Max can help you make money too.
The years of debt you could shave off with Money Max add up. We’re talking hundreds of thousands of dollars for home improvement, family trips, or even an investment property.
It’s all yours to invest in whatever the future holds—it’s your money after all.
The fact is, mortgage lenders will take every cent they can get.
And if they’ve already taken thousands (or hundreds of thousands) of your cash, why give them any more than you have to?
The UFF Money Max Account doesn’t just keep an expert eye on your finances. Using a strategic payoff system, it can combine your assets and immediately take years off your mortgage term.
Money Max provides you with all the financial advice you need to cut down your mortgage term by a third or even in half.
That’s over a decade of hard-earned cash that stays in your bank account where it belongs!
To learn more about the Money Max Account and what it can do for you, visit our homepage.
Questions? We’ve got all the answers. UFF representatives are standing by to help you take back control of your financial future.