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Payment Calculations |
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Be sure you understand how much your monthly
payments will be and what they cover. Your mortgage company should be able
to give you this information in advance. With some loans, you will be
required to make monthly payments on the principal and interest. With other
loans, you may be required to pay interest only on the borrowed amount. With
these loans, your monthly payments will not reduce the principal amount of
the loan. With such a loan, you will be required to pay back the entire
borrowed amount at the end of the loan period. These loans are popularly
known as "balloon loans." If your loan has a balloon payment, you should
consider how you will arrange to repay the entire amount when it becomes
due.
On "home equity lines," the mortgage company does not have to give you the exact amount of the monthly payment, but must explain how it is figured. This is because the borrowed amount will vary and your outstanding balance will change if you use the line of credit. However, if your monthly payment term is 5% of the outstanding balance and your outstanding balance is $5,000, your minimum monthly payments would be $250. |