Calculating Monthly Installments

Let's take a second to break down the main elements of a mortgage installment. First there is the "base payment"; it consists of base payment and the payments on interest. Second, the costs of administering the loan on a monthly base come into the picture. Third, the cost of insurance; and fourth, a life insurance policy (if it's applicable)-all these make up the basic mortgage installment.

Now, let's take a moment to see how lenders calculate mortgage installments. While not all banks do it the same way, you can pretty safely bet they are similar. Prime rates are used to derive interest rates and they're one of the main determining factors. Other factors include your credit rating, the term of the loan, your age, and a few other variables.

Lenders typically set loan terms at 20 years. However, that's more or less a guideline, and it's usually completely negotiable. You can find lenders that are willing to haul the loan for even upwards of 35 years-but the longer you extend the loan, the more chances you take of getting a higher interest rate as well as more many more years of that rate. This is why you would be wise to opt for a variable-rate APR over a fixed-rate-depending on your individual situation.

According to South African institutional guidelines, your total monthly charges cannot surpass 25% of a person's earnings. If you're married, however, you can apply jointly and the value is raised to 30% of your joint incomes-which, brings me to another point. If you're married, and both you and your spouse have stable jobs, this increases the likelihood that you'll qualify for a loan-and possibly a better interest rate at that.

Extra fees; just another one of life's realities

There are other charges typically "tacked on" to your mortgage, but they pale in comparison with the principal (the amount being paid back to the lender) and the interest (which is, of course, the fees for borrowing all that money). Not all banks necessarily require the following, but most mandate at least a couple of them.

These miscellaneous fees can include monthly administration charges-which are usually negligent. Then you have the cost of life insurance-again, something that's affordable with just about any company. Some people might wonder, why life insurance? If you pass away, guess who gets their chunk of your policy? Finally, home owner's insurance, which is mandatory. It protects you, as well as the bank's property, from things like crime, natural disasters, and other unforeseen events.

Variety and accessibility is where it's at

If you are a new or prospective home owner, always recognize that there are more than just a few banks out there. This is all-the more reason to shop around for better deals; essentially, you will not even have leave your house to this. There's nothing short of a ton of websites that will search different banks' loan terms and rates and find the best one for you. Additionally, you can even apply online to get the process started. How easy is that?