The below article has been written by Samantha Baralena of MortgageFit Community. This article describes the basis of calculating mortgage. Mortgage is calculated as a range in between favorable and competitive interest rates. Ideally a borrower should shop around various mortgage lenders in order to avail a mortgage solution which aligns to his or her risk appetite.
Mortgage calculators are based on the underlying premise of tenure of the secured loan and the nature of the property. However, various other factors such as medical report of the borrower, credit score and various other factors are also equally important while calculating the Mortgage loan amount and the percentage of interest.
What sounds relatively easy and simple is often quite an intriguing task indeed. Mortgage loans for home are most common amongst business professionals and credit crunched individuals. Mortgage calculators work around the credit health, loan amount and tenure.
Based on their risk assumptions and pre-loaded logic, a favorable interest and competitive interest rates are calculated. To put it in simple words, banker or a financial institution may choose to offer a range in between favorable and competitive interest rate. The favorable interest rates are beneficial for the lenders and competitive ones are favorable to the borrower. The concept has been prevalent in the market since the market has open up for various service providers.
A mortgage borrower shops for competitive mortgage interest rates with various lenders in order to maximize his or her profit. Unlike, unsecured loans mortgage loans and calculations work out a low interest rate. The major unique selling proposition for a mortgage instrument is the long tenure. Longer tenure periods such as 10-15 years are not uncommon.
Mortgage payments can be stopped by paying off the debt. This is sometimes referred to as the pre-closure of the Mortgage. Mortgage lenders usually charge pre-closure charges apart from the principle payment. This is mainly because the lenders would have anticipated a positive inflow of money with interest component attached and pre-closure would work against their expected returns.
Different service providers manage the mortgage amount calculations in their own unique way. The more reliable ones are likely to scrutinize the documents and property in its entirety before suggesting a mortgage quotation.
In order to maximize one’s wealth the aspects of risks and mortgage calculation should be seeked from the service providers. The ones which are offering competitive rates should be zeroed upon. The next step is to re-negotiate based on the previous quotation.
Terms and conditions of a mortgage instrument should be clearly mentioned in the contract. Mortgage calculations are indeed trickier in nature. Regular payment defaults may led to property foreclosure. Thousands of homes in US & Canada were foreclosed when the recessionary clouds mounted the global economy.
Editor’s note: The author mentions pre-closure charges. When shopping for a mortgage lender, be sure to see if this clause is included or not. There are enough borrowers that are not charging this fee that you should be able to find a lender without this potential tax.