How to Calculate Finance Charges on a Mortgage

Calculating the finance charges on home mortgage is not as hard as some of you may think. By following the right procedure, you can determine the required figure. For those who want to buy a new home on fixed rate mortgage, they are always worried about the closing costs and financial charges connected to the mortgage process. It is always a good idea to determine the amount of money you will need to make the purchase so you could obtain the loan from your bank. Financial charges typically include interest payments, appraisals, application and submission fees and mortgage insurance fees.


  • 1

    Before doing anything else, you must take some time out to find the house you are keen to invest. Selecting a well located house presents a very lucrative investment opportunity. Homes that are situated near the market place experience a great rise in price. If someone is selling such a house at an affordable, accept his offer straight away. Once you have chosen the house, consider speaking to your bank about the possibility of approving the home loan.

  • 2

    You will need to understand the concept behind the compound interest. Essentially, compound interest is used for mortgage applications. The lender will usually calculate the monthly interest on your outstanding balanced and you might find the APR slightly higher than the annual interest rate.

  • 3

    Next, calculate your monthly payments on your mortgage. This can be done by using the financial calculator available on most bank websites. Enter your input interest rate divide by the number of months in an year, the price of the house and the total number of payment you are expected.

  • 4

    Now take product of the monthly payment amount by the total number of payments you will be making. For example if the fixed payment amount if $200 and the total number of payments are 30 then the product will $6000, which will be the interest you will paying. However, sometimes people end up paying a lot more than originally estimated due to additional charges caused by late payments.

  • 5

    Finally, consider adding any other fee the lender charged you to the total amount of interest you are expected to pay to obtain the insurance and your mortgage loan. Additional fees plus your total amount of interest will be the finance charge for your mortgage.

Leave a Reply

Your email address will not be published. Required fields are marked *

nine − 5 =