Tuesday, October 4, 2022

3 Reasons You Might End Up With a Higher Mortgage Payment

Owning a home is a pretty expensive prospect. Not only do you have to contend with monthly mortgage payments, but you also have to cover peripheral costs, like property taxes, insurance, maintenance, and repairs.

Now, some of those costs may be out of your control. Your town sets your property tax rate, and you can’t always predict when you’ll need to make home repairs.

But one thing you may be able to do is keep your mortgage payments on the lower side. Making a larger down payment on your home, for example, could mean paying less on an ongoing basis. But if the following things apply to you, you could end up with a higher monthly mortgage payment than you’d like.

1. You rolled your closing costs into your loan

Mortgage lenders commonly charge fees, known as closing costs, to finalize a home loan. And as a borrower, you generally have a choice: You can pay those closing costs up front or roll them into your mortgage and pay them off over time.

Going the former route means having to bring more money to your closing, and that may be difficult. But if you roll your closing costs into your loan, your ongoing payments are apt to be higher.

One thing to keep in mind is that while some closing costs may be set in stone, others may be negotiable. So it’s worth seeing what wiggle room your lender gives you on those fees.

2. You applied for a mortgage after your credit score took a hit

The higher your credit score is, the more favorable an interest rate you’re apt to snag on a mortgage. But if you apply for a mortgage shortly after your credit score dips, you could get stuck with a higher interest rate — and higher monthly payments to follow.

It’s a good idea to check your credit score before you’re about to apply for a large loan, like a mortgage. And if you see that that number is lower than it usually is, it could pay to put off that application and work on boosting your credit score, which you can do by correcting credit report errors, paying down credit card debt, and being more timely paying your bills.

3. You didn’t shop around

When mortgage rates rise across the board, you may find that no matter which mortgage lender you decide to work with, you’ll be paying more interest on your home loan. But that doesn’t mean you shouldn’t shop around for a mortgage.

If you don’t take the time to compare rate options, you might end up paying more interest than necessary. The result? Higher ongoing monthly payments that eat up more of your income.

Managing mortgage payments can be challenging, so it pays to do what you can to keep those payments to a minimum. If you’re in the process of applying for a mortgage, make sure to compare different lenders’ rates and check your credit score. And also, consider paying your closing costs up front so they don’t add to your ongoing housing expenses.

 

This article was written by Maurie Backman from The Motley Fool and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.