A mortgage is a special loan from a bank that helps people buy homes. It lets you pay for your house over time instead of all at once. This article will explain the different parts of a mortgage payment and what they mean for you.
Getting a mortgage has a lot of good things:
1. Getting a Home Earlier: With a mortgage, you can own a home without needing to pay all the money upfront. You can have your own place and feel proud.
2. Paying Monthly: Instead of paying all the money at the start, a mortgage lets you pay a bit every month. This is easier on your wallet.
3. Building Something Valuable: Each time you make a payment, you’re not just paying bills. You’re also making something called “equity.” It’s like saving money because it can grow over time.
4. Tax Help: Part of what you pay each month can be taken off from your taxes. This can help you save money on your taxes.
5. Value Going Up: As time passes, the value of your home might go up. So, if you decide to sell your home later, you could make more money.
In this guide, we’ll explain the different things that make up your mortgage payment. Let’s pretend you got a loan for N10 million, and you’ll pay it off in 15 years. We’ll use an interest rate of 18%. Knowing about your mortgage payment is important to handle your money well.
Breaking Down a N10 Million Mortgage Loan at 18% Interest for 15 Years:
Let’s imagine a pretend situation to understand what goes into your mortgage payment:
Amount you borrowed: N10,000,000
Interest rate: 18% each year
Time to pay back: 15 years
With these details, your monthly mortgage payment would be around N199,967.63. Now, let’s see what this payment is made of:
Principal Amount: This is the starting amount of N10 million. Every month, a part of your payment goes to make this amount smaller.
Interest: This is like a fee for borrowing money. Because of the 18% interest rate, a big part of your monthly payment goes to interest in the beginning.
Home Insurance and Property Taxes: Your mortgage payment doesn’t cover these, but you should plan for extra costs like these.
What Happens Over Time:
As you pay off the loan over 15 years, the amount you owe gets smaller. Your payments will start to go more toward lowering the main amount you borrowed, and less toward interest. This helps you build up the value of your home.
In Conclusion:
Understanding what makes up your mortgage payment is smart for handling your money well. With a N10 million mortgage loan and an 18% interest rate over 15 years, you’ll pay about N199,967.63 each month. And remember to think about things like home insurance and property taxes. Knowing your mortgage payment helps you make good decisions and handle your money well while owning a home in Nigeria.
