PAYMENT CALCULATIONS
Be sure you understand how much your monthly payments will be and what they cover. Your MainStream Loan Specialist can 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, known as balloon loans, your monthly payments will not reduce the principal amount of the loan, but rather you will be required to pay back the entire borrowed amount at the end of the loan period. 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 balance will change if you use the line of credit. However, if your monthly payment term is 5% of the balance and your balance is $5,000, your minimum monthly payments would be $250.
If the re-payment is interest only, that same loan of $5,000 at 5% would have a minimum monthly payment of $20.83 ($250/12 months). Although most interest only loan re-payments do require a minimum payment of $50 to $100.
Interest rate charges and related plan features
Home equity lines typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past as well as the amount of the margin.
- Subscribe to our free Email Rate Alert, where we monitor interest rates and notify you when they reach a level you are interested in.
- Calculate how much you can afford and more in our Calculators.
- Learn about the benefits of MainStreams true zero closing cost mortgages.
- Complete our MainStream Loan Qualifier for an instant general assessment of your borrowing ability.
- Apply on-line using our Secure Easy Application.
- Get more information on government sponsored VA loans or FHA loans.
- Receive your free eBook, The Mortgage Handbook, to use as a guide as you work through your mortgage application process, including checklists, worksheets and tips.
- Access additional Resources and Tools to aid you in the home buying and lending process.
