Mortgage constant
A mortgage constant is like a magical number that helps you figure out how much money you'll have to pay back every year to the bank when you take out a loan to buy a house.
To help you understand what this means, let's pretend you're going to buy a toy that costs $100, but you don't have enough money, so you ask your parent to lend you the money. Your parent says that you can borrow the money, but you have to pay it back in 10 years with interest, which is like a fee for borrowing the money.
Now, let's say the interest rate is 5% per year, which means you have to pay back $5 every year for the next 10 years, in addition to the $100 you borrowed. The total amount you have to pay back each year is called the mortgage constant.
Similar to this toy example, when you buy a house with a mortgage loan, you'll have to pay back the amount that you borrowed (which is usually a lot more than $100), plus interest, over a period of many years.
The mortgage constant helps you figure out how to budget for these payments, since they'll be the same every year for the entire length of the loan. It's like having a fixed bill that you know you have to pay every year, just like your rent or your phone bill.
So, the mortgage constant is a useful tool to help you plan and budget for your home purchase, and to make sure you can afford the payments for the long-term.
To help you understand what this means, let's pretend you're going to buy a toy that costs $100, but you don't have enough money, so you ask your parent to lend you the money. Your parent says that you can borrow the money, but you have to pay it back in 10 years with interest, which is like a fee for borrowing the money.
Now, let's say the interest rate is 5% per year, which means you have to pay back $5 every year for the next 10 years, in addition to the $100 you borrowed. The total amount you have to pay back each year is called the mortgage constant.
Similar to this toy example, when you buy a house with a mortgage loan, you'll have to pay back the amount that you borrowed (which is usually a lot more than $100), plus interest, over a period of many years.
The mortgage constant helps you figure out how to budget for these payments, since they'll be the same every year for the entire length of the loan. It's like having a fixed bill that you know you have to pay every year, just like your rent or your phone bill.
So, the mortgage constant is a useful tool to help you plan and budget for your home purchase, and to make sure you can afford the payments for the long-term.