Which combination of factors would result in the lowest monthly mortgage payment? There are many of combination of factors that would result in the lowest monthly mortgage payment. The best way to lower your monthly mortgage payments may be through these four steps. The first is refinancing, which takes the borrowing age and interest rate into account. The second step is to stop paying private mortgage insurance. The last two ways are a standard loan extension and protesting the attack. These methods of reducing mortgage payments are legal and expertly approved.
Which Combination Of Factors Would Result In The Lowest Monthly Mortgage Payment?
You are about to buy a house, but you are worried about the monthly payment. Will you be able to pay? How can you keep it as low as possible?
While a mortgage payment is a big undertaking, there are ways to keep it as low as possible. We help you understand the key factors below.
Large Down Payment
Every loan program has a minimum down payment requirement. Some loan programs do not require a down payment, such as VA and USDA loans. While this can be a nice feature if you don’t have any money saved, it can make for a big monthly payment. The more money you have to borrow from the bank, the higher your monthly amount.
Being able to make a larger down payment can help keep your payments low. For example, FHA loans require a 3.5% down payment, but if you can make a 10% down payment, you reduce the payment by just borrowing less money. You still pay mortgage insurance on the loan, but you pay less mortgage insurance by borrowing less money.
Another advantage of making a large down payment is the lack of private mortgage insurance that you will pay off on a conventional loan. If you make a 20% down payment, you can avoid PMI altogether. If you deposit less but still more than the 5% minimum payment, you pay PMI, but for a shorter period. Conventional loans allow you to request a PMI cancellation when you owe less than 80% of the home’s value.
Unfortunately, if you use a government-supported program, such as the FHA or USDA loan, you will pay off the mortgage insurance over the life of the loan, so a larger down payment won’t help in that regard. It also won’t help with VA loans just because they don’t require mortgage insurance.
Long-Term Payment Option
You might think you want the shortest possible term, but if you want the lowest monthly mortgage payments, the opposite may be the case. With a short term, you can pay off your loan in fewer years. This is a good idea, but if you need a low down payment, you want the longest available term.
Today the longest available term is the loan of 30 years. With this term, your loan will be amortized over 360 months. Other loan terms that lenders offer are terms of 25, 20, and 15 years. The 15-year term would have the highest principal as you only have 180 months to repay the loan. That’s half of what the 30-year bond offers.
The good news about taking out a 30-year loan is that you can make a larger installment if you can. You can even use a mortgage calculator and figure out what a 15-year payment would be and make those payments. The extra money you pay on top of your minimum payment will pay off the principal of your loan faster.
Everyone wants a low-interest rate, right? The less interest you pay to borrow money, the better you will feel. Low-interest rates can also help keep your mortgage payments low. Your mortgage payment usually consists of:
- First name
- Real estate tax
- Insurance for homeowners
- Mortgage insurance (if applicable)
If you have a low-interest rate, no matter how much money you borrow, you keep your payment lower. This can help make your loan payments more affordable.
Conclusion – Which Combination Of Factors Would Result In The Lowest Monthly Mortgage Payment?
So, which combination of factors would result in the lowest monthly mortgage payment? In a perfect world, you could make a big down payment, have the longest loan term, and get the lowest interest rate. If you can’t achieve this goal, you can work on at least some of the factors. For example, you may not get the lowest interest rate when you take out a 30-year loan, because lenders take a small risk to extend your loan for that long. But if you can balance the long term with a large down payment, you can get a lower interest rate than if you made the minimum payment and accepted the longer term.
It’s about making the most of your factors. Each borrower has a different sweet spot that will help them get the lowest possible monthly mortgage payment.