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Loan Amount

By on September 14, 2018

The loan amount refers to the total amount of financing a borrower has taken from a lender.

This figure will be used to calculate interest charges and amortized monthly payment.

Sometimes, the loan amount is not the same as the amount requested by the borrower due to the financing of points and settlement costs.

You need to know: What lenders hope you never learn about mortgages

For example, if a house is purchased at $250,000 with 80% LTV, the loan amount required would be $200,000. But with financing costs of $5,000 added to the requested amount, the new loan amount works out to $205,000.

Do note that the loan amount is not the same as loan balance.

The loan amount almost always refers to the total amount of money borrowed from the commencement of the loan.

Loan balance refers to the remaining loan amount that is outstanding at any point in time.

For example if the loan amount at the start of the mortgage is $205,000 with a $1,000 monthly payment, at this point in time the loan balance is also $205,000. However, a year later the loan balance will become $193,000, assuming 100% of the payments go towards the repayment of the principal.

This means that at the start of a home loan, the loan amount and loan balance is similar. But becomes different as soon as the first payment is made.



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