If you are looking to buy your first home, you are making a huge financial decision that will impact your financial health. One of the most important things you can do is find a way to lower your average mortgage payment over the long term. This can be done before you apply or after you have already made your first payment. However, no matter when you choose to work on lowering your payment, there are several options available.
When you apply for a mortgage, you will be required to provide a down payment. Lenders typically recommend a 20% down payment, although this can vary based on lender and programs. Instead of paying the minimum down payment, you can lower your monthly payment by paying a larger down payment. This payment will be applied to the principal balance, which will end up saving you interest.
Be sure to conduct research and compare mortgage products and associated interest rates. Your credit score will impact your mortgage’s interest rate, so be sure to check your credit and resolve any credit bureau report issues to obtain the best interest rate for you. Signing a mortgage with a lower interest rate will allow you to have a lower monthly payment, as a smaller portion of the payment will be allocated towards interest.
Private Mortgage Insurance (PMI)
If you had less than a 20% down payment on your mortgage and utilized Private Mortgage Insurance through your lender, removing PMI will lower your average mortgage payment. PMI ends once you reach the 20% mark of your total mortgage unless an exception applies, so putting additional money towards your principal to pay it off as quickly as possible will help lower your average mortgage payment in the long run.
Paying a little extra every month at the beginning of the loan will lower or eliminate payments at the end of the loan’s life. However, before you send that extra amount every month, make sure there are no pre-payment penalties associated with your loan and that the payments are being applied directly to the principal.
No matter what action you decide to take to lower your average mortgage payment, remember that your mortgage is an important part of your financial health and to thoroughly research before making any decisions. You should also discuss any potential actions with your lender. For more information about mortgage payments and things to consider when looking for a mortgage, download our eBook now!