Fixed Rate Mortgage
A fixed rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to payoff the mortgage balance at the end of the term. Terms are usually available in 5 year increments.
Option ARM Mortgage
This is a special mortgage program designed to give you a very low payment. This mortgage can result in “deferred interest”, increasing your principal balance when the monthly payment doesn't cover all of the accrued interest.
Fully index rate (FIR)
This is the interest rate used to accrue interest on the Option ARM after the initial fixed period has ended.
Maximum annual increase
This is the maximum amount the Option ARM's monthly payment can increase each year through year five, regardless of the Fully Index Rate (FIR). Usually 7.5% of the prior years payment.
Fully Amortizing ARM
This is the most common type of ARM. The monthly payment is calculated to payoff the entire mortgage balance at the end of the term. The term is typically 30 years. After any fixed interest rate period has passed, the interest rate and payment adjusts yearly or every 6 months. A Fully Amortizing ARM will also have a maximum rate that it will not exceed. This calculator uses a maximum interest rate of 12%.
Interest Only ARM
An Interest Only ARM only requires monthly interest payments. Since you are not paying any principal, as you are with the other two types of mortgages described above, this can lower your monthly payment. However, since your mortgage's principal balance is not decreased, you will either have a balloon payment at the end of the mortgage's term or at some point the mortgage will convert to a Fully Amortizing ARM. Like a Fully Amortizing ARM, an Interest Only ARM will often have a period where the interest rate is fixed, and then it is adjusted annually. An Interest Only ARM will also have a maximum interest rate that it will not exceed. This calculator uses a maximum interest rate of 12%.
Mortgage amount
Expected balance for your mortgage.
Term in years
The number of years over which you will repay this mortgage. The most common mortgage terms are 15 years and 30 years.
Interest rate cap
This is the maximum interest rate for this mortgage. The mortgage's interest rate will never exceed the interest rate cap.
Monthly payment
Monthly principal and interest payment (PI) for the Fixed Rate Mortgage and the Fully Amortizing ARM. This is an interest only payment for an Interest Only ARM.
Annual income
Your annual income before taxes. For married couples this is your total combined annual income before taxes.
Purchase price - The price of the home you wish to purchase. This is the actual price you'll pay, not including any closing costs.
Total monthly payment
Total monthly payment that you can qualify for. This is the total of principal, interest, taxes and insurance paid each month. Often called PITI.
Cash on hand
Cash you have for the down payment and all closing costs.
Interest rate
The current annual interest rate you can receive on your mortgage.
Property tax rate
The percentage of your home value that you pay for property taxes. A 1% tax rate for a $100,000 home equals $1,000 per year in property taxes.
Total closing costs
Total upfront costs to close your loan. This is the total of your loan origination fee, points paid and other closing costs.
Loan origination rate
The percentage the lending institution charges for its origination fee, typically 1% For example, 1% on a $100,000 home equals $1,000.
Number of points paid
The total number of points paid to reduce the interest rate of your mortgage. Each point costs 1% of your mortgage balance.
Monthly PMI payment
Monthly cost of Principal Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by this percent and dividing by 12. When the equity in your home exceeds the percentage required for PMI, your PMI payment drops to zero. Please note that this is only an estimate of your actual PMI. The amount you may be required to pay may be higher or lower than our estimate.
Qualify amount
Shown as "Total monthly payment." This is the total amount you qualify for per month. This amount is the total of "Principal, Interest, Tax and Insurance" for your home.
Balances
Your total current balances for your credit cards, auto loans and other loans.
Purchase price
The price of the home you wish to purchase. This is the total price you'll pay for this property, including any closing costs.
Down payment
The total amount you have available to use towards the purchase of this property.
1st Loan Amount
The total amount that will be financed by your first mortgage. Normally, your first mortgage will carry a lower interest rate and then a second mortgage.
2nd Loan Amount
The total amount that will be financed by your second mortgage.
Prepayment
A monthly prepayment of principal you would like to apply to your Interest Only Mortgage balance. |
