Mortgage Calculator

Understanding Mortgages

Modern mortgage lending evolved from ancient property lending practices, with the term "mortgage" originating from Old French, meaning "dead pledge." Today's mortgage calculations use principles developed by financial mathematicians in the early 20th century, incorporating compound interest and amortization concepts.

Mathematical Foundation

Types of Mortgages

• Fixed-Rate Mortgages:
  • 30-year conventional (most common)
  • 15-year conventional
  • 20-year conventional
  • 10-year conventional
• Adjustable-Rate Mortgages (ARMs):
  • 5/1 ARM: Fixed for 5 years
  • 7/1 ARM: Fixed for 7 years
  • 10/1 ARM: Fixed for 10 years
  • Rate caps and adjustment periods

Cost Components

• Principal and Interest (P&I):
  • Base loan repayment
  • Amortization schedule
  • Early payoff options
  • Payment allocation changes
• Additional Costs:
  • Property taxes
  • Home insurance
  • PMI (if down payment < 20%)
  • HOA fees (if applicable)

Interest Rate Factors

• Credit Score Impact:
  • 740+ (Excellent): Best rates
  • 700-739 (Good): Low rates
  • 660-699 (Fair): Average rates
  • <660 (Poor): Higher rates
• Other Factors:
  • Down payment size
  • Loan term length
  • Property type
  • Market conditions

Payment Strategies

• Early Payoff Methods:
  • Bi-weekly payments
  • Extra principal payments
  • Annual lump sums
  • Refinancing options
• Interest Savings:
  • 15-year vs. 30-year comparison
  • Impact of extra payments
  • Refinancing cost-benefit
  • Tax deduction considerations

Qualification Guidelines

• Debt-to-Income Ratios:
  • Front-end ratio: 28-33%
  • Back-end ratio: 36-45%
  • FHA limits: 31%/43%
  • VA limits: 41% total
• Down Payment Requirements:
  • Conventional: 3-20%
  • FHA: 3.5% minimum
  • VA: 0% possible
  • Jumbo: 10-20%