Helpful Mortgage And Real Estate Advice

What Factors Affect Mortgage Payments?

By on November 18, 2013 in Mortgage Rates, Mortgage Videos

When getting a mortgage, a borrower will have to pay a monthly payment for the next 15 or 30 years. The payment size usually depends on a few major factors. Here are five factors that determine the size of a mortgage payment:

Interest rate: When getting a loan for a home, a borrower will pay an interest rate based on his or her credit score. In reality, the lower the credit score, the higher the interest rate. In fact, when a person has a perfect score, they will pay thousand less in interest fees over the life of the loan. This is important to realize as it will make life easier when a borrower can pay off the loan quicker. In fact, as mart consumer should improve his or her score before buying a home.

Loan size: Without a doubt, the loan size will largely determine the monthly mortgage payment. When borrowing a small amount, a person will have a small payment. On the other hand, people who buy million dollar homes will pay a massive monthly payment. In fact, when looking at an expensive home, most working people will determine the affordability based on their mortgage payment and not the overall cost.

Down payment: A buyer, ideally, should make a 20 percent down payment. With this, he or she can avoid private mortgage insurance. Furthermore, with a sizable down payment, a consumer will not have to pay a high monthly payment on a modest home. On the other hand, many young buyers forego the down payment and opt to make larger monthly contributions to the mortgage. Either option works, but a big initial payment will help a person save money in the long run.

Term length: When a person gets a 15 year mortgage, he or she will pay off the house faster. Of course, with a shorter loan, a buyer will pay a larger monthly payments. Of course, most people still opt for a 30 year mortgage.

Payment schedule: When making payments twice a month, a person can enjoy lower payments overall. This is a great option for a person with bi-weekly paychecks who wants to pay down the balance faster.

When a borrower pays attention to the fine print, he or she can save a lot of money in the long run. Remember, there are multiple factors that determine the monthly payment and a consumer must shop around wisely.

Photo Credit

Tags: ,

About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
Have A Question?

© MortgageHomeBase