How Much Home Can You Afford?

Example:

Property Price $1,000,000

Down payment percentage 20%

Length of Mortgage 30 years

Annual Interest Rate 6%

Payment $4,796.40 month

Residential Tax Include Residential Tax in calculation.

Residential (or Property) Taxes are a little harder to figure out... the average residential tax rate seems to be around $14 per year for every $1,000 of your property's assessed value. Let's say that your property's assessed value is 85% of what you actually paid for it - $850,000.00. This would mean that your yearly residential taxes will be around $11,900.00. Property Tax Adds $991.67 To Your Monthly Payment.

Calculations and Amortization

The down payment = The price of the home multiplied by the percentage down divided by 100 (for 5% down becomes 5/100 or 0.05) $200,000.00 = $1,000,000.00 X (20/100)

The interest rate = The annual interest percentage divided by 100 (0.06 = 6%/100)

THE MONTHLY FACTOR = THE RESULT OF THE FOLLOWING FORMULA:

The monthly interest rate = The annual interest rate divided by 12 (for the 12 months in a year) 0.005 = 0.06/12

The month term of the loan in months = The number of years you've taken the loan out for times 12.  360 Months = 30 Years X 12

The monthly payment is figured out using the following formula:

Monthly Payment = 800,000.00 * (0.0050 / (1 - ((1 + 0.0050) - 360)))

The amortization breaks down how much of your monthly payment goes towards the bank's interest, and how much goes into paying off the principal of your loan.

Amortization For Monthly Payment: $4,796.40 over 30 years