Mortgage Payment – “M” – Monthly

The monthly mortgage payment is a very important piece of the puzzle when it comes to negotiating the best deal on your home loan. Not only does the monthly mortgage payment determine your ability to qualify for home, but most people build their budgets around their mortgage payment. Thus, pay full attention to the contents of this article.

Let’s assume that you followed my ATOMIC Method of Mortgage Savings to a tee and you’re now comparing mortgage payments. How do you know which mortgage is the best deal for you?

Mortgage payment calculator.
The CI 3415 is a great mortgage payment calculator. Take this calculator to the bank with you if you want to intimidate the loan officer.

How is a Mortgage Payment Determined

The mortgage payment is a function of three things:

  1. Interest rate (also known as the Note Rate),
  2. Mortgage Term,
  3. Loan Amount.

Therefore, before comparing one loan’s mortgage payment to another, you need to make sure these three variables are equal between the loans you’re comparing.

Method

If you followed along up until now, all you have to do is put mortgage payments side by side. Again, just as in my previous articles, you need to make sure to look at the big picture. Don’t just compare mortgage payments to each other.

Something I want you to be mindful of is the Mortgage Term. A lender might present you with a 30 year ARM loan that has a lower interest rate. For example, a 7/1 ARM mortgage is common and is fairly easy to qualify for. At some stages of the economic cycle, the 7/1 ARM carries a much lower interest rate than a 30 year fixed loan. Just because the interest rate and mortgage payment are lower, doesn’t make it the best choice for you, and it probably isn’t.

If you don’t know where to start when determining what mortgage term is right for you, I wholeheartedly suggest you contact a trusted financial professional.

Little Differences Are NOT a Big Deal

Should a $10 difference between two mortgage payments matter to you? Probably not. $10 is only $120 a year and $3,600 over 30 years. Faced with a choice–save $10 a month or go with a lender you feel will provide you with better service, I suggest you prioritize service. Don’t grind your loan officer over $10. There’s probably nothing he can do for you anyway and it will just complicate your relationship. Steer clear of appearing cheap throughout the mortgage process, and be respectful to everyone involved. Carry yourself as an educated, frugal consumer.

Choosing better service over tiny monthly savings is especially important if you’re purchasing a home. In a purchase, you want to prioritize service because so many things can go wrong that working with a low cost, unresponsive lender can cause you serious financial losses. Even if you’re refinancing, do you want to save $10-20 a month but be stuck with an unbearable lender for the next 30 years? Of course you don’t. Good service matters.