How to Figure Out Your Mortgage Payment

Deciding to purchase a new home is one of the biggest decisions that you can make. Not only are you determining where you’ll live for the foreseeable future, but you also are making a decision that will heavily affect your finances. Your mortgage will likely make up a big chunk of your monthly expenses, so you need to know exactly how much it will cost you before making any final decisions. Figuring out the costs of selling a home is easy, as you can just use a seller closing costs calculator. However, when purchasing a home, many factors can affect your mortgage payment, making the calculations slightly more difficult. So how exactly can you figure out your mortgage payment and ensure that it’s not too high? Let’s take a look.

Home Price

The biggest factor in how much your mortgage payments will be the price of the home you’re buying. It doesn’t take a real estate agent to know that the more your home costs, the larger your mortgage payment will be. Since your home’s list price is such a big part of determining your mortgage payments, it’s extremely important that you stay within your budget. If a home has a list price well outside your budget, it is highly recommended that you pass, regardless of how much you want it. Even if you are able to scrounge up enough money to make a decent down payment, a list price that is out of your budget will inflate your mortgage payment to the point where your financial situation will greatly suffer.

Down Payment Size

Another big factor in determining the cost of your mortgage payments is the size of your down payment. The more money you pay upfront, the less you have to take out in your mortgage. If your loan has a smaller principal thanks to a larger down payment, less interest will accrue, and your mortgage payments will be smaller. You may also receive more favorable interest rates with a larger down payment since lenders will view you as less of a risk. Typically mortgage lenders will want you to pay 20% of the list price as a down payment, with the rest being covered in the mortgage. So if you purchased a $200,000 home, you are recommended to pay at least $40,000 as a down payment. However, as mentioned before, having a larger down payment can save you money down the road and increase your financial flexibility in the future. 


One thing that many people don’t factor into their mortgage calculations is the length of the mortgage. Different lengths of mortgages have different pros and cons. For example, a shorter mortgage will have much higher monthly payments. However, since you are paying it off quickly, there is less time for interest to be accrued. As a result, although you are paying larger monthly payments, you are actually saving money in the long run. On the other hand, longer mortgages result in smaller monthly payments, however, you’ll pay more in interest thanks to the long length of the mortgage. You need to tailor your mortgage length to your current financial situation while also predicting your future ability to make payments. 

Interest Rate

The last big factor in your mortgage payment that needs to be discussed is the interest rate. When you take out a loan, you need to pay everything back in full plus interest. This is how lenders make their money. High interest rates mean that you’ll have a lot more to pay back than your original principal, while lower interest rates mean that you won’t have as much added expenses. Finding a good interest rate is key to having a monthly mortgage payment that you can afford. As mentioned before, having a higher down payment will cause your interest rate to go down since you are considered to be less of a risky investment. Another way to get a lower interest rate is by improving your credit score and showing lenders that you are trustworthy. You can do this by paying off your current debt, building a track record that shows you always pay back the money you borrow.

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