Each point costs a fee equal to 1 percent of the loan amount and typically reduces your mortgage rate by about one-eighth of a percentage point. So if you're borrowing $250,000 and the standard interest rate is 4.00 percent, you can buy a point for $2,500 and reduce your rate to 3.875 percent.
How much should you save every month? Many sources recommend saving 20 percent of your income every month. According to the popular 50/30/20 rule, you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and at least 20 percent for savings. We agree with the recommendation to save 20 percent of your monthly income.
These calculators work primarily by figuring out your debt-to-income ratio and then how much you can afford to pay for your monthly mortgage payment. This is similar to how banks decide how much to lend you. The typical bank limit on monthly mortgage payments is about 28 percent of your gross monthly income.Therefore, the bank thinks you can devote up to 28 percent of your household income to your mortgage payment and expenses (including taxes, insurance and association dues).or example: Your goal mortgage payment, plus expenses, is $1,500 per month, and you pay $700 per month in rent. So each month when you pay rent, youâll also put $800 into your savings account. At the end of six months, youâll have a pretty hefty savings account.