Keeping mortgage payments low
For various reasons, some homebuyers want to keep their mortgage
payments as low as possible. There are a few different avenues
you can explore if you are particularly interested in paying the
bare minimum each month.
First, here’s a general tip: mortgage payments are always
cheaper when you choose a loan with a longer term. A fixed-rate
mortgage, for example, is often offered with either a fifteen
or thirty-year repayment term. The thirty-year term will always
translate to lower mortgage payments.
There are also special types of mortgages that usually require
small mortgage payments. Adjustable-rate mortgages offer an introductory
period during which your interest rate is quite low, meaning that
your mortgage payment is also low. The risk you assume, of course,
is that your mortgage payments might skyrocket after that introductory
period has terminated.
Similarly, balloon mortgages offer an introductory period with
low interest rates. For this reason, they can be a good choice
for borrowers who need to keep payments down. Of course, after
that introductory period you will be forced to refinance or sell
the house. Many experts only advise balloon mortgages when you
are anticipating a move.
Finally, some lenders offer mortgages that allow you to make
interest-only payments for a certain period of time. After that
period of time, mortgage payments increase considerably to repay
the principal. Since such mortgages have a fixed interest rate,
borrowers will know from the outset exactly how much their mortgage
payments will be raised.
Remember, it is not necessarily a sound financial decision to
pay the bare minimum each month. If you can afford to, it is best
to take on a heftier payment. That way, you’ll finish the
process of repayment sooner that you had anticipated.