The interest rates on the home loan being historically low, many French people plan to buy a property, even to renegotiate their credit. Before visiting apartments or houses and contacting a credit institution, Good Credit advises calculating your monthly payments using a calculator.
Which formula to calculate monthly payments?
It is possible to determine yourself the amount of the monthly payments from the rate, duration and capital. However, the formula is quite complex: (C xt / 12) / 1 – (1 + t / 12) – n . To understand, let’s use an example with the following data:
– capital (C) : $ 200,000
– rate (t) : 4.5%
– duration (n) : 20 years, i.e. 240 months
The calculation is therefore this: (200,000 X 0.045 / 12) / 1 – (1 + 0.045 / 12) -240 = $ 1,265.30 .
Calculate your mortgage online
There is, however, a much simpler way to get an idea of the monthly payments. Several home loan calculators are available on the Internet. You just need to enter the capital, the rate and the duration.
This solution is very practical since it is possible to perform a multitude of simulations with different rates and longer or shorter repayment periods. It should also be noted that these tools also make it possible to determine other important elements, such as monthly payments with insurance or the total cost of credit.
What monthly payments for a mortgage?
You should know that a borrower cannot theoretically exceed the debt ratio of 33%. Clearly, if his income is $ 3,000, he will not be able to claim monthly payments beyond $ 1,000. Often, to reduce their monthly payments, borrowers extend the repayment tenure. Some banks also accept credits which can now reach 30 years. But this choice has an effect on the interest rate.
While a credit taken out over 20 years can benefit from a rate of 1.70%, it will often be necessary to add a point (2.70%) by preferring to repay over 30 years.
From this example, we observe monthly payments of $ 1,044 over 20 years and a credit cost of $ 50,560. Over 30 years, monthly payments drop to $ 871, but the cost of credit explodes: $ 113,560. The borrower must, therefore, try to limit the duration of repayment while ensuring the monthly payments that he will be able to assume.