Definition: The word "mortgage interest calculator" refers to a tool or online platform that allows users to calculate the monthly payment on an adjustable-rate mortgage (ARM) based on their income, debt-to-income ratio, and other factors.
To understand this term in more detail, let's break it down:
1.
Term:
The term of the loan.
2.
Monthly Payment:
The amount of money paid each month to the lender for the principal balance on the mortgage.
3.
Interest Rate:
The annual percentage rate (APR) charged by the lender for the total interest paid over the life of the mortgage.
4.
Down Payment:
The amount of money that a borrower pays upfront as part of the loan application process.
The calculator will use various formulas and data points to calculate the monthly payment, which can be used to determine how much of an ARM you qualify for based on your income and creditworthiness. Some common features include:
-
Down Payment:
This is the amount of money that a borrower pays upfront as part of the loan application process.
-
Annual Percentage Rate (APR)
: The annual percentage rate charged by the lender for the total interest paid over the life of the mortgage.
-
Interest Coverage Ratio (ICR)
: A ratio that compares the monthly payment to the principal balance on the mortgage, allowing borrowers to understand their ability to make payments and their overall financial health.
Understanding these concepts is important for borrowers who are considering a mortgage or refinancing an existing loan. It can provide useful information about what they need to know before making decisions.
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