Mortgage Payments Explained

Whether you're a first-time home buyer or a seasoned professional at this point, your future mortgage payment is going to be one of your top concerns. The mortgage payment is the monthly payment homeowners make, which goes towards the principle and the interest of their home loans. 

If you're considering buying a home at the Lake of the Ozarks, you should begin to educate yourself on some of the factors that influence your mortgage payment.

Home Price and Down Payment

One of the main factors that influence your mortgage payment is the price of your home and what percentage of the price you put down as a down payment. The more expensive the home, the greater your loan will be and, thus, the greater your monthly payment. If you make a down payment of less than 20%, you will have to pay for Private Mortgage Insurance (PMI), which protects the lender from the losses that can occur if a borrower defaults on a loan. If your down payment is 20% of the total price of the home or greater, you will be not be required to pay for PMI.

Interest Rates

Interest rates are largely responsible for determining how high your monthly mortgage payment will be. The annual interest will be divided into monthly payments. Your monthly mortgage payment will be a little higher than the interest due so that some of the loan principle is repaid each month. 

Interest rates hit an all-time low a couple of years ago, but they have been steadily climbing over the past several months. It's important to secure the lowest rate available; a rate that is even 1% higher can make a drastic difference in your total amount owed.

Graphic taken from Keeping Current Matters

Loan Terms

The type of loan you choose will also impact your monthly payment. Home loans typically come in one of the three most common forms:

• 30-year fixed rate mortgage
• 15-year fixed rate mortgage
• 5/1 adjustable rate mortgage (ARM)

Fixed rate mortgage loans guarantee a consistent monthly payment for the duration of your term. 15-year loans usually have a slightly lower interest rate, but their monthly payment is higher (in order to pay off your home faster). With the 5/1 ARM, your monthly payment will remain consistent for the first 5 years, and then it will fluctuate to match the current interest rates. 5/1 ARM loans can be helpful because they generally offer a low interest rate during the first 5 years, but they can also be risky if your financial position changes or if the interest rates increase drastically after the initial 5 years have passed.

There are several other factors that also influence your monthly mortgage payment, such as your credit score, debt, and yearly salary, but these three will get you started on the right track! We also offer a free mortgage calculator on Fran Campbell Team's new website. 

Once you determine what type of loan you will be able to qualify for, you take your search for a new home at the Lake of the Ozarks to the next level.

Why not start today? Fran Campbell Team can answer all your questions about owning a home at the Lake of the Ozarks, and we can help you find your dream home at the Lake!

Contact the Fran Campbell Team to schedule a showing!

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Contact Fran Campbell Team at RE/MAX Lake of the Ozarks for all your real estate needs.

Fran Campbell Team
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