Simple mortgage question.

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frugalcoconut
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Re: Simple mortgage question.

Postby frugalcoconut » Sun Jun 19, 2011 4:55 pm

Your mortgage payment depends on a multitude of factors. One is the amount that is being loaned to you, which is basically the purchase price of the home minus the down payment money that you're contributing out of pocket. As a general rule, a larger loan amount equals a higher mortgage payment. Second is the amount of time that they're spreading out the payments before you ultimately pay off the entire balance (typically 30 years or 15 years but there are plenty of options available) and third is the interest rate that you're being charged by the financial institution for borrowing from them. These go hand-in-hand: the interest rate on a 30-year is typically higher than for a 15-year because they're taking on more risk in letting you take longer to repay them, but the shorter repayment period on the 15-year requires larger payments to entirely pay off the same amount in half the time. As a general rule, higher interest rates mean higher payments and shorter loan terms mean higher payments. "Jumbo loans" (or mortgages that exceed a certain threshold dollar amount) command a higher interest rate. Your credit score/history, your income/employment history, your assets, your debt-to-income ratio, the loan-to-value ratio, prevailing market rates, and a host of other items all come into play.

DoingHomework
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Re: Simple mortgage question.

Postby DoingHomework » Sun Jun 19, 2011 5:00 pm

What he said!

I'd add though that it can sometimes be harder and cost a little more in percentage terms to take out a mortgage on a cheaper house. A forum member here had an experience like that recently and wrote about it on here.


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