Question:

How is mortgage interest payment reduction affected by interest rate reduction?

Answer:

If you want a mortgage interest and payment reduction the only way to get it is either interest rate reduction or increasing the loan term.

Some people think that by making additional payments to the principal they could after all reduce their monthly payment. This, however, is not so true. Making an extra monthly payment towards the principal and setting up a biweekly plan does effectively reduce the amortization term of the mortgage and the mortgage interest payment over the life of the loan (the interest cost of the loan) but not the mortgage monthly payment or the interest rate.

The monthly payment remains the same. At the beginning, before you take the mortgage, you can have mortgage payment reduction if you make a bigger down payment. This may even get your interest rate reduced and perhaps you'll be spared paying PMI.

Once you take the mortgage, the way to cut mortgage interest rate and payments is by refinancing to reduced interest rates, or taking a longer term mortgage.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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