Determine your monthly mortgage payment, total interest expense and pay-off date for a fixed rate mortgage. The graph below the table shows how the principal balance gets paid down over the term of the mortgage and how at the beginning of the mortgage, the mortgage payment is comprised of mostly interest while at the end of the mortgage, the payment is comprised of mostly principal
Monthly Housing Payments
- Loan Type
What Determines Your Monthly Mortgage Payment
Your loan amount is one of the most important factors in determining your mortgage payment. Simply put, the larger your mortgage, the higher your monthly mortgage payment and the smaller your mortgage, the lower your monthly mortgage payment. Borrowers should evaluate mortgage payments for different loan amounts to determine the monthly payment they are comfortable with. In addition to your mortgage payment, borrowers should factor in other housing expenses including property tax, homeowners insurance as well as other potentially applicable expenses such as mortgage insurance and homeowners association (HOA) dues, to make sure they are getting a mortgage and home they can afford.
The higher your mortgage rate, the higher your monthly payment seems pretty straightforward but a lot of factors go into determining your interest rate. The amount of closing costs can affect your rate as mortgages with higher closing costs generally having lower interest rates, and vice versa. For example, a "no cost" mortgage where the borrower pays no recurring closing costs has a higher mortgage rate than a mortgage with standard closing costs. Borrowers can also elect to pay discount points, which are an additional up-front fee added to your closing costs to "buy-down" or lower their mortgage rate. As we discuss below, mortgage type and length also impact your interest rate and monthly payment.
Lenders offer mortgages with different lengths, which are also called terms. 10, 15, 20, 25 and 30 year mortgage terms are available to borrowers with the 30 year term being the most common. The length of your mortgage directly impacts your mortgage payment with the longer your mortgage term, the lower your payment. For example, the monthly mortgage payment on a 30 year mortgage is less than the payment on a 15 year mortgage. The monthly payments are lower on mortgages with longer terms because you pay back the loan over a longer period of time. On the other hand, the shorter your mortgage term, the lower your interest rate and less interest expense you pay over the life of the mortgage. So while the monthly payment on a mortgage with a shorter term is more than the payment on a mortgage with a longer term, you actually save a significant amount of money because you pay a lower interest rate and pay off your loan sooner, which reduces your total interest expense.
The mortgage program you select also affects your interest rate and monthly payment. Additionally, depending on what type of mortgage program you choose, your interest rate and payment may change over the course of your loan. If you select a fixed rate mortgage your interest rate and monthly payment stay constant over your entire loan, but you pay a higher interest rate as compared to an adjustable rate mortgage (ARM) or interest only mortgage, at least initially. With an adjustable rate mortgage, you pay a lower initial mortgage rate for up to ten years but then your interest rate an payment adjust and could potentially increase for the remainder of the loan. With an interest only mortgage you pay only interest, and no principal, at a lower interest rate for up to ten years, and then you are required to pay both interest and principal plus your mortgage rate is subject to change, which means your monthly payment could increase significantly. Borrowers should be sure to understand how their interest rate and monthly payment could potentially change over the course of their mortgage depending on the mortgage program they choose.
More FREEandCLEAR Mortgage Resources
Compare mortgage rates and fees for leading lenders near you. Comparing proposals from multiple lenders is the best way to find the mortgage with the lowest interest rate and fees
Review, compare and understand the pros and cons for the three main types of mortgage program -- fixed rate mortgage, adjustable rate mortgage (ARM) and interest only mortgage -- to select the mortgage that is right for you
Understand how mortgage term impacts your interest rate, monthly payment and total interest expense over the life of a mortgage
Money and time-saving advice across a wide range of mortgage topics from an expert with over forty years of industry experience