For anyone looking to finance a home, the size of your average mortgage payment is a key concern. The amount of your monthly payment will affect your budget for the length of your loan term, which may stretch decades into the future. While every situation is different, these three factors will play a key role in determining the amount of your average mortgage payment.
• Term length: The longer the term of your mortgage, the lower the average monthly payment. Keep in mind, however, that the longer you stretch out your payments, the more interest you will pay overall. Whether you choose a fifteen, twenty or thirty-year mortgage, or some other term length, is an important decision that must take into account your income, expenses, assets and other factors.
• Type of interest rate: Do you want a fixed or variable interest rate? Your decision will affect your average mortgage payment. A fixed rate never changes, no matter how much the market fluctuates over the term of your loan. Variable rates are affected by changes in the market and will fluctuate. Before deciding if you want a fixed or variable rate, it is wise to educate yourself on current interest rates as well as historical trends and market projections.
• Down payment size: How much are you able to put down right away? The larger the size of your down payment, the lower your average mortgage payment will be. The amount of your down payment may also affect your term length. A large down payment will save money in the long run, but many home buyers prefer to keep more cash in their pockets and opt for a higher monthly payment.
Your unique circumstances will determine the amount of your average mortgage payment. Discuss these factors and all aspects of home mortgages with an experienced lender before making any important decisions. By equipping yourself with knowledge, you can set yourself up for a successful home buying experience. For more information about mortgages, types of rates, and which may be best for you, download our whitepaper now!