What affects my mortgage payment?
These factors can affect your mortgage payments
- The amount of the down payment.
- The size of the mortgage loan.
- The LTV (Loan to Value) ratio.
- The interest rate.
- The length of the repayment term and payment schedule
The amount of the down payment
Obviously the larger the down payment you put on your home purchase, the lower the amount borrowed, and therefore a lower mortgage payment.
Normally a larger down payment will also get you a lower interest rate by reducing your "risk factor" to the lender.
The size of the mortgage loan
I guess we just covered this, the lower the amount of the mortgage the lower the mortgage payment.
The Loan to Value ratio
The loan to value ratio is exactly what it means. If your property is worth $200K and your loan about is $150K then your LTV is 75%. The lower your loan to value ration, the lower of a risk factor you are to the lender.
The interest rate
Your interested rate will also have its play in determining your monthly payment amount.
For example:
If your loan amount is $200K with a 6% interest rate for 30 years fixed, your monthly payments would be $1199.10. Now increase the interest to 7% and that monthly payment becomes $1330.60 for the same loan and terms!
The length of the repayment term and payment schedule
The longer the loan repayment schedule the lower your monthly payments. Take the example use above and make that loan for 15 years and the monthly payments go from $1199.10 to $1687.71.
Yes you do payoff your home 15 years earlier and earn more equity quicker by paying the principle off quicker, but your minimum monthly payments will be higher.
Use the Calculator below to play with the number as see what works for you. Remember this is just an estimate, you should consult with your mortgage broker or lender for more detailed numbers.
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