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Breaking Down your Monthly Mortgage Payments

One person in a $500,000 home could have a different payment amount each month compared to someone else who also has a $500,000 home, did you know that? Maybe that’s common knowledge, I don’t know but either way let’s break down why that is, and what things can have an impact on your overall monthly mortgage payment.

For those of you who are renting and looking to purchase your first home, or even if you own a home but never really look at the breakdown, your monthly payment consists of more than just the amount for the house. It usually consists of the principal and interest together, taxes, home insurance and sometimes other costs such as private mortgage insurance or PMI.

So what can have an impact on the amount you pay every month? Your credit score is one leading factor. The better your credit score, the better your interest rate could be compared to someone else; lower interest rate means a smaller payment each month. The more money you save and can bring to the closing table will also play a role. The standard is 20% down, so on a $500,000 home that would be $100,000 in cash to bring to the closing table. By bringing more cash to closing, the lower your loan will be, decreasing your overall monthly payment.

Now $100,000 is a lot of cash to bring to the table, let alone trying to save even more than that. Many lenders have different programs that require as low as 3% down. Just know that by bringing less cash, obviously your monthly payment will be higher. Something else to keep in mind is that by having less than 20% means you will most likely be required to pay for PMI. This is usually around $100-$200 extra added on to your current monthly payment.

Things like taxes, HOA fees, home insurance have less flexibility when it comes to changing the price. They are just good cost items to think about when determining the amount you want to pay each month and finding a comfortable price point for you. Things you can do would be to find neighborhoods you like that don’t have an HOA or shop around for home insurance. Sure these things may only save a little bit of money each month but every little bit counts, right?

Whenever you’re ready to speak with a lender, they can help answer any questions you may have or if you have any unique circumstances that you aren’t sure about. Owning a home is not unachievable and we love getting to help our clients make their move!

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