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Calculating your future mortgage payment

Calculating your future mortgage payment

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Whether they are purchasing their first home or buying an investment property, those looking into buying property in Illinois should understand what their mortgage payment will be once they have made this purchase.

Doing this prevents buyers from running into problems in the future with their finances.

Factors that impact mortgage payments

While the price of the property plays a large role in what a homeowner will pay every month on their mortgage, this amount also depends on several other factors. These include the following:

  • The type of mortgage–Typically, a buyer’s mortgage payments will be higher if they have a 15-year mortgage as opposed to a traditional 30-year mortgage.
  • The interest rate on the loan—If the interest rate on the loan is higher, the buyer will make larger mortgage payments every month in comparison to a buyer who was given a lower interest rate.
  • The down payment—The down payment lowers the total amount owed on the mortgage, consequently lowering the buyer’s monthly payments.

In addition to the price of the home, length of the mortgage, interest rate and down payment, the property taxes and homeowner’s insurance on the property also impact a buyer’s monthly payments.

Two questions buyers should ask

Before buying a house and obtaining a mortgage, there are two important questions buyers should ask themselves. First, how much is a lender willing to offer? Secondly, how much is a comfortable amount to borrow? The second question is extremely important, especially for first-time buyers. Before going out with their real estate agent to look at homes, future buyers should sit down and determine how much they can put aside every month to devote to a mortgage payment without straining their finances.

For example, a couple who is interested in settling down and buying their first home desires to buy a house with three bedrooms for less than $200,000. Together, they make $85,000 annually and currently have $25,000 saved up for a down payment. After sitting down and looking at their budget, they decide that they can afford to acquire a mortgage of approximately $175,000, even though their lender approved them for up to $250,000. Although they will have to make a few sacrifices, like bringing their lunches to work every day, they feel like this decision will ensure that they are always able to comfortably handle their mortgage payment every month.

Purchasing a home is one of the largest transactions most people make in their lives. Those who want to know more about how much they can comfortably put towards a mortgage payment every month may benefit from speaking with an attorney for guidance.

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