One of today’s most important topics deals with monthly mortgage payments and how to make them more affordable. Let’s look at the three factors directly affecting your monthly payment, then conclude with a look at your down payment.

Before we begin, it might be a good idea to visit my website at www.money99.com and find our FREE CALCULATORS under the additional resources button. There you can enter an unlimited number of variables to see how your monthly payment is affected.

The three factors which have a direct impact on your payment are the number of payments, the interest rate, and the loan amount.

As you decide how many payments you will be making, keep in mind that lenders offer three primary loan terms: 30 years, 20 years, and 15 years. One lender told me they actually offer a ten year loan, but that the rate is typically identical to the 15 year loan program.

In the Atlanta market, the most popular term by far is 30 years. In fact, the only benefit to accepting a 15 year term is a slightly reduced interest rate, typically about half a percent less than the 30 year program. In exchange for that interest rate savings, your monthly payment of principal and interest may be as much as 40% higher each month.

For example, if you borrow $100,000 at 6% for 30 years, your monthly loan payment would be about $600. But if you substituted a 15 year payback and received the same loan at 5.5%, your payment would jump to about $817, an increase of about 36%. At an equivalent 6% rate, that differential exceeds 40%.

I am aware that the entire difference is faster payback of principal and that fact can help you avoid thousands in excess interest fees, but a 36% jump puts home ownership out of the reach of many. Furthermore, interest rates are so low today for all these loans, that I do not recommend a shortened payback period unless you simply have a goal of being debt free. It simply does not make economic sense in many cases.

The next factor that affects payments is the interest rate, and that amount is largely outside of our control.

I use the term "largely" because there are some options we have when deciding on interest rate, but picking a lower rate may have serious consequences.

For example, the prevailing 30 year fixed rate loan in Atlanta today is being offered at a rate of about 6%. We can lower that rate by about half a percent if we accept a shorter payback term of 15 years, but that causes our payments to jump up. But there is another way to lower the rate even more, and still keep a thirty year term.

That loan is called the "five year balloon" program, and it is calculated as if it were going to last 30 years in duration. The interest rate offered with this loan is typically almost a full percentage point below the 30 year fixed rate, making it an attractive 5%. But there is a catch.

With the five year balloon program, the loan is designed to mature in exactly five years after you borrow the money. So you would need to either sell, refinance with another loan, or find another way to pay off the loan after 60 months had passed. And trust me, 60 months passes very quickly when you know you have a big bill to pay at the end of the term.

The five year balloon loan is appropriate only when you are sure you will be selling within a five year period. For example, if your boss tells you that it is highly likely that you will be transferred in five years, then a loan like this might be a good bet for you. Even so, people’s lives change, and you may end up changing jobs before five years is up, or your boss may change his mind.

With interest rates at a forty year low, my advice is to focus on the popular thirty year fixed rate available today, then sleep well knowing that your monthly payment amount can never go up unless you choose to pay it off more quickly.

Finally, your loan payment is directly affected by the amount you are borrowing, called your "loan amount." And that amount is typically the amount left after you subtract your down payment from the proposed purchase price.

But what if you have more available than the standard 5%, 10%, or even 20% down payment amount. Does it make sense to put down as much as possible?

That depends on your financial goals and your ability to make wise money choices over the years. The best bargain available on long term financing is the 80% loan spread out over a 30 year term. That loan avoids additional costs for mortgage insurance, but spreads fixed closing costs over the maximum amount of dollars.

Talk with your financial advisors to find out what options are available to you, and select the best combination of term, rate and amount you can find in today’s lending market.