Lowest Monthly Mortgage Payment
Some home buyers are focused on interest rates while others are often looking to find out how to get the lowest monthly mortgage payment.
With the right strategy, you can get the lowest monthly mortgage payment possible with a competitive interest rate.
How to Get the Lowest Monthly Mortgage Payment
There are many factors which have an impact on your monthly mortgage payment. We will discuss all of the levers you can pull to help get the lowest monthly mortgage payment possible.
Some of these are things you can do while others are things to avoid.
Interest Rate – The lower the interest rate, the lower your down payment will be. There are multiple ways to lower your interest rate below.
Improve Credit Scores – Interest rates offered by lenders are directly tied to your credit scores. If you can improve your scores, then your rate will be lower and so will your monthly mortgage payment.
Increase Your Down Payment – Increasing your down payment will not only result in a smaller mortgage, but it also will result in a better interest rate. Both a smaller mortgage amount and lower rate will lower your payment.
Buy Your Rate Down – You have the option of buying the interest rate down by paying points. You can negotiate with the seller to pay for your closing costs and/or your discount points. This will lower your monthly mortgage payment.
Property Taxes – If you shop for a home in an area with low taxes, that can help to lower your monthly payment. As an example, if you can find a home with taxes that are $1000 per year less, you can save $83 per month.
HOA Fees – HOA fees are an added monthly expense that you will have when purchasing a condo, a townhome, or a home in an association. Look for properties without an HOA and your monthly payment will be lower. HOA fees can be anywhere from $150 per month and for more expensive homes over $1000 per month.
Homeowner’s insurance – Your homeowner’s insurance is often included as part of your mortgage payment. You have the ability to shop for a cheaper mortgage insurance company to help lower your monthly mortgage payment. One easy way to do this is to increase your deductible which will result in a lower annual premium.
Adjustable Rate Mortgages – Some home buyers look for adjustable rate mortgages because the interest rate on those is typically lower than that of a 30 year fixed. Something to consider is how long you plan to own the home. If you thing you may sell within the next five years then this may be a good option for you.
Interest Only Mortgage – With an interest only mortgage, you are paying just the interest each month and no principal. This results in a lower monthly required payment. It also means you are not paying down your mortgage. The interest only portion of the mortgage is usually anywhere from 5-10 years. Read more about interest only mortgages.
Avoid PMI – PMI or private mortgage insurance is required when you put less than 20% down on a conventional loan, or anytime you use FHA insured financing to purchase the home. You can save hundreds of dollars per month by putting at least 20% down and removing PMI from your payment.
Refinancing to Get the Lowest Monthly Mortgage Payment
If you are refinancing, you can follow the methods referenced above to help lower your monthly mortgage payment. What you cannot do is avoid paying an HOA fee because you already own the home.
This is the time when you can use refinancing as a tool to lower your total monthly payments including any other debt you may have.
A cash out refinance can pay off high interest credit card bills, car payments and other debt. What you may be left with is just a mortgage payment that is now larger, but your total payments should be lower.
If you would like to lower your total monthly payments, then click to consult with a loan officer who can let you know how much you can potentially save each month. It could make sense to refinance even if your rate will increase.
How Much is the Average Mortgage Payment Per Month
According to the Census Bureau, the average monthly mortgage payment is over $1723 per month. This is the average of both new and old mortgages.
Meanwhile, the monthly averages have been increasing as home prices have skyrocketed. New home purchases are now going to have monthly mortgage payments that are much higher than that.
Will My Payment Be Lower if I Rent or If I Buy a Home?
There are many people renting right now whose rent is very high. Often times they believe purchasing a home would be better because they would rather just buy a house if the rent is going to be so high.
What many renters fail to understand is there are many expenses involved when purchasing a home. If you rent, you are responsible for the rent payment and maybe also utilities.
Meanwhile, if you purchase the home you are then responsible for everything. Insurance, maintenance and increasing taxes each year will become your reality.
Read our article on the costs of home ownership to get a full understanding.