In this video, I'm going to show you everything you need to know about
your monthly mortgage payment and give you a tool, a free calculator to
help you be able to shop for homes and understand what the mortgage payment is.
Often.
One of the hardest things to do when you're looking to shop for
home is understand the actual true cost of owning monthly.
So I'll give you that link that you can download.
But first, let's talk about your monthly.
Payments.
Okay.
So this is how much you actually need to pay to the mortgage company every month.
If you do take out a loan on a home and it's not as straightforward, it's
not just one number all the time.
So your monthly mortgage payment is made up of several different things combined.
And then the lender normally says, okay, you owe this one number here.
So the first thing is.
Principal.
So principal pays down the loan.
So let's say you take out a loan for $300,000.
The principal, every time you pay principal each month lowers that.
So from 300,000 to 299,000 and some hundred dollars.
Okay.
So it's lowering your principal with each month on your mortgage payment.
You can choose to pay an extra principal if you want to pay
down the loan even sooner.
So maybe.
30 year loan.
You can actually pay extra principal each month with your lender to
shorten that down if you want to.
And you'll also pay less interest on it.
So your principal, you also have interest in the interest is charged to you based
on the loan, the outstanding loan balance.
So not the initial loan balance.
It's what the current loan balance is.
And this is as an annual number.
Okay. So for instance, if we have a 3%.
That's 3% annually that you pay on that loan.
So if it's a hundred thousand dollars loan, you're paying $3,000
in interest every year that the balance is a hundred thousand.
So in the first year we have that balance.
So you're going to be paying about $3,000 that first year, and then the next year,
your balance is actually lower because you've been paying down principal.
And so you'll be paying interest on the new balance and
that's going to re amortize.
Okay.
So basically what's happening is you pay less and less interest.
Each month and more and more principal each month.
Okay.
And I'll show you a chart here in just a minute to explain those.
So with our interests, something interesting here is there's
going to be a difference whether it's fixed or it's adjustable.
Okay.
And this is going to depend on the type of loan that you get.
If you get a fixed 30 year fixed 15 or whatever, a fixed rate loan,
your interest rate stays the same.
And so does your monthly payment, the interest won't change because
your interest rate doesn't change.
However, if you get an adjustable rate mortgage, there could be
changes depending on that type of adjustable rate mortgage that you get.
So you want to be careful in understanding this principle and interest.
If you have a fixed rate loan should save it.
So if I know what the number is now, if it's a thousand dollars in principal
and interest now, and it's a fixed rate loan, it's going to always stay a
thousand dollars a month over the next 30 years or however long my loan is.
But if it's adjustable, then it could actually change depending
on the type of loan that I.
Then you also have mortgage insurance, and this is going to change
depending on the type of loan that you have with conventional loans.
This normally will drop off.
Once you have 20% equity in the home.
If you have an FHA loan, a USDA loan, then mortgage insurance stays on for
the life of the loan, unless there's a special, some special considerations
that we won't get into depth here.
But mortgage insurance basically protects the lender.
It's an extra insurance.
If you don't pay back the loan, that's what that's there for.
So it doesn't protect you as much as that would.
Then escrow now, escrow was interesting because it's actually optional
depending on how you set up your alone.
Normally to waive an escrow account, you need about 20% down with most
lenders, but escrow basically takes these lump sum payments and converts
them into monthly payments for you.
So for instance, taxes in Ohio taxes are semi-annual payments.
All right. So they're paid two times per year.
All right.
So let's say that the lender didn't collect taxes for you.
All of a sudden in July, you have a tax bill and it's $2,000 and you're like,
oh my gosh, I didn't save $2,000 for taxes, but I have this $2,000 bill.
And so escrow was created.
So lenders will actually help you save this money.
And the way that they do it is they'll basically say, okay, if your
taxes are $1,200 a year, pay us $100 per month, we'll set it aside in a
separate savings account for you.
And then when that bill comes, we'll pay it out of that account
For you. alright. And again, if you have less than 20% down, a lot of lenders
will force the escrow account.
We'll make it a requirement.
So something to be mindful of and that's going to be up to you.
But
This escrow account sometimes is on loans and sometimes isn't on loans.
So taxes is often an escrow, same thing with homeowners insurance
is usually paid annually.
So instead of having this surprise, bill of insurance come up, what happens is
a lender will say, we'll just take that number divided by 12, keep that money
in a separate savings account for you.
And then when the bill comes, we'll pay it out of that savings account.
And so often lenders.
All of these numbers and put it all together and one bottom line.
So they might say you owe $2,000 per month, and that
includes everything in here.
Now let's take a look at this chart to just see how things change.
If we're talking about fixed, most people are working with a fixed loan.
Now just a little rate as just full rate mortgages, it used to be a little
bit more popular pre housing crash, but they've just fell in, fell out
of favor a little bit because there is fluctuation with the payment here.
Again, if we have a fixed rate loan, your payment should be the same
every single month for the life of the loan until you pay it off.
The only thing that will change in your monthly payment.
And this isn't up to the lender is if your homeowner's insurance changes or
taxes change, often what happens is sometimes people will come to me and
be like my mortgage payment changed.
I thought it was going to be this.
And why did it increase?
Maybe a couple of years after they bought their home and it's
because taxes increased, right?
The lender doesn't control your taxes.
It's your county and your state.
So that might change an often tactics.
Tend to go down, unfortunately.
So taxes may change and increase her payment.
And there's nothing that you can do about it.
You just have to pay more into Texas.
You owe the home and you're paying taxes on that.
Homeowner's insurance.
If your insurance cost goes up, then so will your mortgage payment.
If you're including that in your escrow accounts, and it could go down, maybe
you get some savings on your insurance and that lowers your monthly income.
Payment, but we can see here in this chart, we, in the green, we have principle
and the yellow, we have interest.
And so it's interesting in this, this first year we can see the spread.
There's so much more interest being paid than principal, and that's super common.
Okay.
Over time, what will happen is you see this kind of curve, we pay less and less
interest and more and more principal.
However, the payment stays the exact same.
So see how this is.
Flat across the board, the payments are going to be the exact same, but what
will change is what is being allocated?
How much of it goes to interest?
How much of it goes to.
Principal.
And then there's some kind of additional costs in here that we do need to consider.
One would be homeowners association.
So this may be super small or non-existent for you, or it might be really expensive
depending on where you're living.
So homeowners association I've seen the same or anywhere from 25
bucks to even like $400 a month.
It just depends on where you're at utilities.
Utilities is a huge consideration as well because a lot of people
just look at the one mortgage.
They just see, okay, what's my monthly payment, but don't forget.
You also have utility costs that you need to consider when you're shopping for a
home, because there's a little bit of this lifestyle creep that can happen.
So maybe someone saying I pay $1,500 a month in rent.
And so I'm looking at homes and maybe I'm like, oh yeah, I can
do, the 1750 for a mortgage.
That's fine.
But as that creeps up, we also have to remember that utilities are there
too, that we do have to keep them.
And some of those utilities that we were paying, maybe some of those
were included in your prior rent.
And so you might not have you might not be thinking of the total cost of utilities,
so very, something you really want to keep in mind in here, especially if you're
purchasing like an older house that may require maybe it's not insulated as well.
Air conditioning and heating is going to be really expensive for you.
And that could be something you want to watch out for.
And then also the main, why don't we keep going to an eraser, the maintenance.
Cost savings as well.
Often it's suggested that you would save a percentage of your purchase
price each year in your savings account or maybe a separate account.
To be able to afford maintenance costs as they come up and have this kind of
buffer in case there are emergency costs or repair costs or whatever that come
up, because remember, if you're not renting anymore, you don't have somebody
taking care of this stuff for you.
So if the furnace goes out, there's nobody to call it's you.
And so you likely want to have some savings built up in there.
You don't want to just have this emergency come up and then you have to
go use a credit card or something for.
That.
Okay.
So some calculators that I'm going to show you.
First I would just be careful of the, the payments that are shown on sites
like Zillow, realtor.com or whatever, because often they're giving you the
best case scenario considerations there, like 20% down, conventional loan,
super low rate, all that kind of stuff.
And so it's easy to go look at home and see oh, that's
an easy payment I can afford.
And go right in offer without considering what the actual monthly payment is.
A great one is us warpage calculator.org.
I really liked that one.
And then, so I have a Google sheet that I'm about to show you.
I have it in the description.
You can go ahead and download that for free, and it's going to help
you compare the monthly payment and considerations for different
houses when you're home shopping.
So let's go ahead and take a look.
Okay, so here is the monthly payment calculator.
All you have to do is text my number 9 3 7 3 5 8 6 5 4 2, just text, hashtag payment
to it, and it will send you the link.
So what you want to do is here's the instruction.
So you want to go to file, make a copy.
And what I have in here is an option to put in your life loan details that you know
maybe you could just want to take a guess right now, or maybe you've been
pre-approved and some of this right now, and then I have options where you can put.
The house address, right?
So you can come in here and just do 1, 2, 3 main street, whatever.
Put in the home details.
And what will end up happening is you can compare the monthly
payment of each of these.
And so we'll talk through what this looks like.
So let's start with house one.
I'm going to pull up Zillow and show you again how to do this, because a
big problem that people have as they're looking for homes, and then they're
like what's the actual monthly payment.
How do I compare these side-by-side?
We're just going to pull up random homes.
I'm not going to put in tons of details here.
So what I'm going to do.
Is if I was shopping for homes and I was like, oh, here's
some homes I want to compare.
I'm going to paste in the address here.
Why is it a.
There we go.
I'm going to paste in the address just so I can reference it later, then I'll
go ahead and find our price 244,900.
So I'll put that as our price, two 44,900 and let's first
actually put in our loan details.
So maybe I'm doing 5% down.
Let's say my interest rates 3% mortgage insurance.
You can talk to your loan officer about this.
This is going to be pretty common for maybe somewhere around
a conventional loan is 0.6%.
FHA is 0.85 USDA's 0.35 BA is 0.6.
We're going to go with as a conventional loan homeowners insurance rate.
This could depend on your area, right?
Florida is going to have much higher homeowners insurance than Ohio would.
So this is going to be pretty common for my area and we're
going to do a 30 year loan.
If you're doing 15, just 15.
So we're going to do 30 and on the sheet, you're only changing numbers in blue.
So we have our price then square footage.
All right. So 1890.
Now, the reason we have square footage in here is I'm going to
help you auto calculate utilities just as a rough estimate.
So you can get an idea.
So 1890 monthly HOA.
Let's see what this is.
On Zillow, what we can do is actually scroll down.
And we're going to find monthly cost HOA fees.
It looks like there are none listed.
So it looks like this won't have an HOA and HOA are not
very common around my area.
Annual tax.
Let's scroll up here, property taxes, 41 91 for 20 19 41 91.
And then this is utility cost per square foot.
This is 14 cents per square foot for utilities, and this might
be different for your area or different for different house.
This is just to get a ballpark range.
You're welcome to come in here and increase what that cost is
or decrease it if you want to.
But in case it's going to be a solid number for us to work with.
Then we also have the maintenance savings.
This is how much of the home price, what percentage are we keeping away
in a separate savings account that we want to save a monthly for this home?
So 1%, right?
So on a $300,000 house okay.
This is 250.
So on a $250,000 house, we're saving $2,500 a year.
Is that going to be enough for you?
And maybe you want to increase it to 2% or 3%, whatever works for you.
So let's say 2% as maybe a better number for us.
So it will auto calculate our principal and interest. We talked about that.
Taxes mortgage insurance, homeowners insurance HOA.
So $1,600 a month.
This is what the lender would actually bill us each month in this scenario.
However, there's also the other costs that we need to consider.
And this is where a lot of, excuse me, a lot of people can get messed
up when they're looking at buying a home because they only see
the 1600, but we can't forget.
The other costs associated with its own rate.
So we have the utility costs and this is based off of that 14 cents a square foot.
If I wanted to, I could raise this so 20 and we can see that number jumps.
So this is going to be a ballpark range for us and utilities.
And the bigger the home, the more that you utility cost is going to be which is why
we have the square footage in here, right?
If this was a 3000 square foot house that a utility costs hoops
up about 300, that utility costs jumps up as well.
As well.
Okay.
Then here's our monthly maintenance savings.
So we're saying we would save $400 every month in a maintenance cost.
And again, you can change it so we can drop this down to
one, if we want to lower that.
All right.
So we're going to say around two, just to be conservative, right?
So on here, 244,900, we'd be saying we're saving about $5,000.
Okay.
So that actually gives us a total of the monthly payment.
Plus the other costs that we need to consider and utilities
and savings of 2272 per month.
That's vastly different than 1600.
And so you can see it, there was that $673 a month in these costs
that maybe we didn't consider.
So it's a little bit scary to just see the $1,600 is what the
mortgage company is charging us or collecting for us, including escrows.
But there's the other total cost of that home as well.
Okay. So let's compare this to another home.
That would be somewhat similar.
So this is three beds, two baths in Centerville.
Let's say we're comparing it to that's compared to this one.
This is probably see how similar this is going to be probably very similar for us.
So 294, 900.
So we'll do the same thing.
294,900.
We're going to, this is 2, 2, 2, 5 West Lawn as Lawn Drive.
Okay.
Square footage is 2378.
Okay.
Monthly HOA must scroll down here.
No HOA, just for the sake of the example, let's just put in,
I don't know, a hundred bucks.
Just for the example, annual taxes, 4368, 4368.
We're going to keep utility cost the same.
We'll do six savings of 200.
And so now we can take a look at the differences here, right?
We had two properties, one's about $50,000 more than the other.
And so what does that actually do to our monthly figure?
$1,600 to 1970 that the mortgage company would require.
And $824 in these kind of other costs.
And so the difference here is actually from 2272 to 27 94 with these as well.
Okay.
So I'm not going to do a house three, but what I would consider
in here is what you can also do is use this to compare offers, right?
So keep these numbers the same and take a look at, okay what
if we offered three 10 on this.
What would that do to your monthly payment?
So same house.
Put that right there.
Going up by about $15,000 in our offer would increase the cost by
just about just a little bit, $100 per month as our bottom line.
So maybe that's something that you want to consider or use in here.
You're welcome to use this calculator, however, suits you.
So again, if you want this, just text my number 9 3 7 3 5 8 6 5 4 2.
Just text, hashtag payment in there to get this feel free, to
use it and hope this helps you.