How interest rates & prices impact your monthly mortgage payment

Mortgage payments are the biggest expense every month for most home owners. Sometimes they can be overwhelming, especially for first time homebuyers. The price you pay for your property is not the only factor that determines your monthly payment. Your down payment, interest rate, and “points” (a way to lower your interest rate by a lump-sum payment up front) you pay, will make a big impact on your monthly payment. Since the rates drastically effect the monthly mortgage payment, borrowers are inclined to find ways to acquire the best possible rate, including shopping around with different mortgage brokers.  Figuring out what monthly payment you are comfortable with is an important step before you meet with a realtor in Norwalk to get out and see every property on the Norwalk real estate market.

Your mortgage payment

Since your monthly payment is made of up principal and interest (and often taxes and insurance too), obtaining the lowest possible mortgage payment involves getting an approval for the lowest interest rate. Borrowers qualifying for the lowest interest rate are usually able to spend more on a home loan.  The reason is that if you are spending less on interest each month, you can afford to spend more on principal for the loan, which helps boost your buying power.  On the other hand, an increased interest rate can cut down your buying power. For instance, according to, a mortgage of $300,000 with an interest rate of 5% and a term of 30 years has a monthly payment of roughly $1,610.46 (before insurance and taxes).  Using the same figures and just reducing the interest rate just 1% (from 5% to 4%) would reduce the monthly payment to $1,432.25.  That is a savings of $178 per month.  We have seen interest rates tick up recently, which is important news for those who have their eye on a Norwalk house for sale.

Credit and interest

To keep your mortgage payments low, you need to begin by watching your credit history and credit score. Even before lenders approve your loan application, they carry out a thorough qualification process. They study your past credit patterns, which include current and past debts, and your payment history, to find out if you are eligible for a mortgage. If you do qualify, the mortgage interest rate is based upon your credit score and what interest rate is obtainable in the marketplace. Generally speaking, if your credit score is high, you’ll have increased chances of getting the lowest possible interest rate.  Your Norwalk Realtor should have a general idea of how this works.  Your loan officer or mortgage broker should be able to explain this in detail.  What type of credit score do you want?  The higher the better, but a score in the 700+ range will get you more favorable financing terms.

Fixed rate vs. adjustable rate

There are many housing options available in the Norwalk real estate market.  To be in a position to act on a property for sale, a buyer needs to have a base-line understanding of how financing works.  Unless they are paying cash, the financing aspect is very important.   A buyer should be able to find a home loan that they can comfortably afford. Fixed-rate mortgages offer predictable payments and stability. However, if you intend to live in your house for a shorter period of time, a mortgage with adjustable rate will offer you a lower interest rate (translating into a lower monthly payment) and will save you a significant amount of money each month.   There are upsides and downsides to every financing option, and figuring out the best one for you is the starting point in the home buying process and is strongly recommended before you get out to see any houses or condos for sale in Norwalk.


Questions on Norwalk real estate or how financing impacts your home buying decisions?  Email Todd Turcotte at: CONTACT ME