How to calculate how much to pay for a mortgage?
Purchasing a home with a mortgage is a serious step that requires not only long-term financial stability, but also preliminary weighing of this decision, taking into account the smallest details.
It is hardly possible to answer unambiguously and accurately the question of how much to pay per month for a mortgage. It all depends on the amount and term of the loan, as well as other nuances.
However, still: how to calculate how much to pay for a mortgage? Examples of preliminary calculations are provided later in the article.
What is the monthly payment made up of?
The size of the monthly mortgage payment is a multi-level system of calculating interest on the loan and for servicing, as well as the body of the loan. Depending on the interest calculation system, the total amount for the month is formed.
In this case, the payment can be annuity (in the form of equal values) or differentiated, i.e. decrease from month to month.
There are several factors that influence the size of the monthly payment:
- Individual bank policy. Despite the fact that mortgage interest rates have decreased significantly in recent years, each bank sets its own value. In some lending institutions the rate is more attractive, in others it remains frighteningly high. If we assume that the borrower took out a mortgage for 25 years, then the total amount of interest will be quite large, and a difference of even 1% significantly affects the final cost of the loan.
- Loan terms. The longer the loan term, the larger the final overpayment for the loan will be.
- Insurance fee. A mortgage loan is unthinkable without insurance (title, life, health of the borrower). The insurance interest increases the amount of the monthly payment. About a fifth of the monthly payment is insurance. You cannot refuse insurance.
- An initial fee. The minimum advance required by banks is 10% of the appraised value of the property. You can find programs without a down payment, but it is better for the borrower to contribute part of the funds themselves. Then the loan will be generally cheaper.
Expert opinion
Evgeniy Belyaev
Legal consultant, financial expert
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Each bank's website has a loan calculator that can be used to calculate approximately how much you will have to pay for a mortgage. By specifying the basic data (amount, down payment, rate), you can find out the size of the monthly payment.
How is the mortgage amount based on income calculated?
The amount of income affects the size of the mortgage, the likelihood of getting it, as well as the interest rate on payments.
It is practically impossible for people of liberal professions, without a stable income, to get a mortgage loan. Citizens with low incomes will be denied large amounts of lending. People with a stable high income can be provided with a maximum mortgage loan.
Different banks set different percentages of the borrower's income aimed at repaying the debt. It is dictated not only by the bank’s policy, but also by the amount of income. If your income is small, then about thirty-five percent will be used to repay the loan.
In the case of high income of the borrower, the figure can reach more than sixty percent. You should know that wages are not the only source of income that the bank takes into account when determining the monthly payment.
How to calculate how much to pay for a mortgage in 2020?
As mentioned above, the amount of the monthly payment depends on many factors, and most of all, on the interest on the loan.
To calculate the approximate amount of the minimum deposit, you need to find out from the bank not the advertised interest rate, but the effective rate, which includes:
- interest on the fact;
- insurance fee;
- interest for servicing and maintaining the account;
- bank commissions for issuing and accruing funds.
It turns out that the final amount of the interest rate depends on many components that the borrower did not even know about. That is why it is worth finding out the amount of the effective rate from the bank.
Banks that advertise interest rates do not indicate that the additional interest on a compound loan exceeds 4-6%.
The monthly payment is calculated based on the above indicators and can be calculated according to an annuity and differentiated scheme.
Most often, banks use an annuity payment scheme, when the borrower pays the same amount every month . You can calculate it yourself or through a calculator online.
A differentiated or equally decreasing payment involves paying off 2 parts: debt and interest . Every month the borrower pays the principal, the value of which does not change, and interest, which is calculated based on the balance of the debt, due to which the payment becomes smaller every month.
Bid
In all banks, the minimum rate is possible only if the borrower enters into a life and health insurance contract. Otherwise, the rate increases by 1 percentage point. But according to the law, it still cannot be more than 7.5% per annum.
Read on the topic: Instructions: how to get a mortgage at 6.5%
Four banks on the list offer a low rate if additional conditions are met. Thus, in TKB the rate of 4.84% applies if you make a one-time payment for a rate reduction in the amount of 4.99% of the loan amount (otherwise - 6.49%). A rate of 5.5% at Vozrozhdenie Bank is possible if the borrower has a “Neprostokarta” bank card (otherwise - 6%). At Alfa-Bank, a rate of 5.99% is valid if you take a loan with an initial payment of 40% and an amount of 6 million rubles in Moscow and the Moscow region, from 5 million rubles in St. Petersburg and the Leningrad region and from 2.5 million ₽ in other regions (with the same amounts, but an initial payment of 20-40%, the rate will be 6.19%; in other cases - 6.5%). Bank St. Petersburg offers a 6% rate only to salary clients (otherwise - 6.25%). At Sberbank, the rate of 6.1% will increase if you abandon the “Electronic Registration Service” (up to 6.4%).
Mortgage 1 million for 10 years: how much to pay per month?
According to statistics, 65% of Russians close their home loan within 8-10 years, trying to quickly part with the mortgage burden.
Experts also advise taking out a mortgage for a period of no more than 10 years. The most optimal period is 5-8 years: the overpayment will be less, and if you make an initial payment of at least 25%, then the monthly payment will become moderate.
Mortgage for 1 million... Nowadays, such a figure for housing sounds ridiculous for residents of many large cities in Russia. But it is sometimes difficult for residents of the constituent entities of the Russian Federation to save even this amount. Therefore, a mortgage of 1 million in small towns is very relevant.
So, an approximate calculation for the declared amount of 1,000,000 for a period of 10 years. Let's assume that the loan rate is 9.35%, an initial payment of 15% of the amount has been made; in this case, the annuity payment (excluding monthly commissions) will be 10,929 rubles. The total overpayment for the loan will be 461,493 rubles. If the mortgage is issued without making an advance, then the monthly payment increases to 12,858 rubles, and the overpayment – to 542,933 rubles.
How does the down payment affect the mortgage loan amount?
The down payment is part of the cost of the apartment (housing) that the buyer pays independently. The remaining amount (mortgage loan) is paid by the bank.
The size of the down payment allows the bank to preliminarily assess the financial capabilities of the borrower and affects the interest rate on the loan.
The higher the down payment, the lower the interest, and the less you will ultimately have to overpay. And the likelihood of getting a mortgage in this case is much higher.
Again, the larger the down payment, the smaller the loan payments will be required, which means it is possible to reduce monthly payments if the bank offers such conditions. This option is possible for citizens who have substantial savings, but do not have a stable large income.
The source of payments can be cash savings, maternity capital or funds received from the sale of one’s own real estate.
Amount of credit
The maximum mortgage amount under the state program is 8 million rubles in Moscow, Moscow region, St. Petersburg and Leningrad region. In other regions this amount is 3 million rubles.
It turns out that if we take into account the maximum loan size and the minimum down payment, then in Moscow and St. Petersburg it will be possible to buy housing for 10 million rubles (with a down payment of 2 million rubles), and in other regions - for 3.75 million rubles (with a down payment of 750 thousand ₽).
The minimum mortgage amount may vary. The smallest loan from the banks in the table can be taken from Rosselkhozbank - from 100 thousand rubles. Bank Vozrozhdenie and Sberbank allow you to take out a mortgage from 300 thousand rubles. The biggest limitation is that of Raiffeisenbank, where mortgages start from 1 million rubles.
Selecting optimal lending conditions
So, after considering the main factors influencing the size of the monthly payment and identifying some of the pitfalls of mortgage lending, we can outline the optimal ratio of the terms of such a loan for a person with an average income:
- It is worth taking out a mortgage if your income allows you to pay the bank up to half of your monthly earnings (if the payment is 30,000, then you need to earn at least 60,000). Paying more than half of your salary will very quickly make you regret taking out a loan, so it is better not to exceed this share.
- The down payment should be made as high as possible, so it is worth preparing for the loan financially - it is optimal to have 25-30% of the total cost of the property on hand.
- Experts recommend choosing a loan term of about 10 years (most loans are taken out for 7 years, and for a term of more than 15, overpayments reach double and triple values).
- Based on the “input” parameters - income, contribution, term - you need to look at the current mortgage rate in different banks. As a rule, it is 12-15% per annum, and this can be considered the optimal amount.
Based on the average salary of a citizen, the average total family income, prices for food, clothing and basic necessities, as well as when considering current housing prices, we can draw the following conclusion: when applying for a mortgage for a two-room apartment for a period of 10 years, you will have to pay about 40,000 rubles per month. With a mortgage agreement for a period of 15 years, subject to a down payment of 50%, the amount is reduced to 30,000 rubles per month.
General principle for calculating a mortgage
The payment amount that must be paid each month according to the mortgage consists of two parameters - principal and interest payments.
To calculate, you must have the following parameters:
- Mortgage size.
- Duration of payments.
- Type of payment - annuity (monthly payments are the same throughout the entire mortgage repayment period) and differentiated (monthly payments decrease throughout the entire mortgage repayment period).
- Fees, in particular for maintaining accounts and issuing mortgages. So, it is important to choose an acceptable interest rate taking into account all the borrower’s expenses.
Having this data in hand, you can begin the calculation using the following instructions:
- Find out the loan amount using the formula:
Estimated cost of housing - Down payment amount
- For an annuity type of payment, calculate the amount of the monthly payment using the formula:
- For a differentiated type of payment, make the calculation using the formula:
As you can see, the calculation formulas are quite complex, so it’s easy to make mistakes when calculating. To prevent this, it is recommended to use an online calculator, which also allows you to select the type of payment:
Good to know! What documents are needed for a mortgage at SberBank (full list).
What does a mortgage calculator calculate?
The loan calculator allows you to find out 5 main loan parameters:
- monthly payment amount;
- total amount of overpayment;
- the share of the regular contribution that will be used to cover accrued interest;
- the minimum income required to obtain a loan of a specified amount.
In addition to standard mortgage calculators, you can find more complex services online that additionally calculate the effective interest rate.
