Payment
Calculations
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.
