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For a detailed breakdown of what each of these terms and values means, take a look at our definition guide below!
Mortgage Term Definitions
This refers to the appraised value of a home. This is used in part to determine if property mortgage insurance (PMI) is needed.
The loan amount is the amount a borrower is borrowing against the home. If the loan amount is above 80% of the appraisal then PMI is required until the loan is paid off enough to where the Loan-to-value (LTV) is below 80%.
The interest rate is the quoted APR a bank charges the borrower. In some cases a borrower may want to pay points to lower the effective interest rate. In general, discount points are a better value if the borrower intends to live in the home for an extended period of time and they expect interest rates to rise. If the buyer believes interest rates will fall or plans on moving in a few years, then points are a less compelling option.
The loan term is the number of years the loan is scheduled to be paid over. The 30-year-fixed-rate loan is the most common term in the United States, but as the economy has went through more frequent booms & busts this century, it can make sense to purchase a smaller home with a 15-year mortgage. If a home buyer opts for a 30-year loan, most of their early payments will go toward interest on the loan. Extra payments applied directly to the principal early in the loan term can save many years off the life of the loan.
Property tax is the local rate home owners are charged to pay for various municipal expenses. Those who rent ultimately pay this expense as part of their rent as it is reflected in their rental price. One can’t simply look at the old property tax payment on a home to determine what they will be on a forward basis, as the assessed value of the home and the effective rate may change over time. Real estate portals like Zillow, Trulia, Realtor.com, Redfin, Homes.com & Movoto list current and historical property tax payments on many properties. If property tax is 20 or below, the calculator treats it as an annual assessment percentage based on the home’s price. If property tax is set above 20, the calculator presumes the amount entered is the annual assessment amount.
Property Mortgage Insurance policies insure the lender gets paid if the borrower does not repay the loan. PMI is only required on conventional mortgages if they have a Loan-to-value (LTV) above 80%. Some home buyers take out a second mortgage to use as part of their down payment on the first loan to help bypass PMI requirements. FHA & VA loans have different down payment and loan insurance requirements which are reflected in their monthly payments.
Most homeowner policies cover things like loss of use, personal property within the home, dwelling and structural damage and liability. Typically, earthquakes and floods are excluded due to the geographic concentration of damage which would often bankrupt local insurance providers. Historically, flood insurance has been heavily subsidized by the United States federal government; however, in the recent home price recovery, some low lying areas in Florida have not recovered as quickly as the rest of the market due in part to dramatically increasing flood insurance premiums.
Home Owner’s Association dues are common in condos and other shared-property communities. They cover routine maintenance of the building along with structural issues. Be aware that depending on build quality, HOA fees can rise significantly 10-15 years after a structure has been build, as any issues with build quality begin to emerge.