Your Guide to Mortgages: No Luck Needed

A young couple views homes while looking for new house.

As the luck of St. Patrick's Day approaches, the idea of finding your own pot of gold in the form of homeownership might be on your mind. At the core of this journey lies the key concept of a mortgage—a financial tool that opens the door to achieving the American dream. But what is a mortgage, and how does it work?


Discover the ins and outs of mortgages with Armed Forces Bank, from learning about mortgage rates to using the power of mortgage calculators. Rest assured, you won't need the luck of the Irish to embark on your homeownership journey.

What are Mortgages?

Fundamentally, mortgages are loans provided by financial institutions, such as Armed Forces Bank, to assist individuals in buying a home. This contractual agreement involves you, the borrower, offering the property as collateral to secure the loan. Most commonly, borrowers opt for a 30-year mortgage term, granting them three decades to repay the loan through monthly installments comprising both principal and interest.


So, how does the mortgage process work? Firstly, you find the house you wish to call home. While you might not have all the cash on hand, a down payment (a fraction of the total cost) is typically required to show your commitment to the purchase.


After making your down payment, the bank or lender steps in to finance the remaining cost of the house through a loan, which you agree to pay back gradually. Instead of repaying the entire loan at once, you make manageable monthly payments. Once the loan is fully repaid, you become the proud owner of your dream home – no luck required.

How are Mortgage Rates Determined?

When you have a mortgage, it’s essential to remember that you have to pay interest to your mortgage lender as well as paying back the principal. The amount of interest you’ll pay is determined by mortgage interest rates (or mortgage rates for short).


These rates can vary widely due to several factors. Economic indicators like inflation, employment rates, and policies by the Federal Reserve heavily influence current mortgage rates. In addition, market conditions, borrower creditworthiness, and loan terms also play roles in determining these rates. The term of the loan indicates how long you will be repaying the mortgage—for instance, 30-year and 20-year mortgage rates differ.


At some point, you might find it beneficial to refinance your mortgage, offering the potential for a lower interest rate. It can be challenging to understand all the complexities of mortgage rates, including how much you will ultimately pay over the life of your mortgage loan. However, mortgage calculators are a helpful tool to simplify planning for your financial future.

How Does a Mortgage Calculator Work?

Mortgage calculators, also known as mortgage payoff calculators, employ mathematical formulas to estimate different aspects of a mortgage, including monthly payments, total interest paid, and loan amortization schedules.


Using a mortgage loan calculator is simple—input different variables like the loan amount, interest rate, and repayment duration. The calculator then tells you how much your monthly payments will cost and the total interest you will pay over time. Mortgage calculators can be especially handy because you can adjust and experiment with different numbers to see how it impacts your payments. Whether it's adjusting the loan amount, choosing a longer or shorter repayment period, or exploring various interest rates, you can determine what scenario is most fitting for your life.


Furthermore, mortgage calculators are fantastic tools for mapping out your financial future. They provide a clear breakdown, showing how your payments are split between repaying the loan amount (principal) and covering the lender's interest. This helps with budgeting effectively and making smart decisions about your housing expenses, both now and in the future.

Explore Your Mortgage Options at Armed Forces Bank

Whether you're a first-time homebuyer or hoping to better understand your mortgage options,* Armed Forces Bank is here for you. Our seasoned mortgage experts and loan advisors are ready to guide you through the process, helping you achieve your goal of homeownership without relying on luck—just expert guidance.


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*Subject to credit approval.  Each loan product has specific terms and conditions. Fees apply.