Major Factors That Will Determine Your Monthly Mortgage Payment

July 8, 2022

When you decide to buy a house, you are going to be filled with a ton of excitement. Becoming a homeowner is a big deal, and one that should be celebrated. But after the initial excitement fades and you have more meetings with your mortgage broker and they lay out what your payments are going to look like. There can be a lot of sticker shock for homeowners when they see just how a mortgage payment is calculated. Here are three of the major factors that will determine your monthly mortgage payment, and what you can do to get the cheapest payment possible.

What You Pay

The first major factor that will determine your monthly mortgage payment is what you pay for your home. The more money you need to borrow to buy your home, the larger your monthly mortgage payments will be. This is because you are paying off a larger debt but within the same restricted time frame of thirty years. Not only that, but you are also paying interest on a larger amount of money borrowed, further increasing your payments and the total out-of-pocket costs over time.

Your Mortgage Rate

Another critical factor that will determine your monthly mortgage payment is your mortgage rate. Not every mortgage is going to be issued with the same interest rate. The better your credit score is and the higher your income, generally the lower your interest rate will be. You may be able to negotiate for a lower rate. You should always shop around for mortgages and have lenders compete for a lower price to secure your business. At the end of the day lenders need your business too, so make sure that you are getting the best deal you can find for yourself.

The Federal Interest Rates

The final major factor that will determine your monthly mortgage payments is the federal interest rates. The federal reserve is responsible for lending money to institutions that then lend that money to individuals and businesses. When the government increases its rate, the rates for all other types of interest tend to move up with it. The higher the federal interest rate when you sign your mortgage and lock in your rate, the higher your payments will be.

Understanding a mortgage payment and billing structure can be complicated if you have never owned a house before. Understanding your monthly mortgage payment can really boil down to just three simple aspects. If you know these three things, then you know everything that impacts your monthly mortgage payments.

Check out this article on how to make sure you’re not walking into a money pit!

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