How can homebuyers potentially reduce their monthly mortgage payments?

How can homebuyers potentially reduce their monthly mortgage payments?

• A. By waiting longer to buy a home
• B. By making a larger down payment
• C. By choosing a high-interest rate
• D. By selecting an adjustable-rate mortgage without an understanding of risks

Answer: (B)

Making a larger down payment directly impacts monthly mortgage payments by reducing the loan amount that needs to be financed. When homebuyers make a larger down payment, they borrow less from the lender. Since monthly payments are based on the total loan amount, a smaller loan results in lower monthly payments. Additionally, a larger down payment can sometimes lead to better loan terms, such as a lower interest rate, further decreasing monthly payment obligations. The other choices do not logically lead to a reduction in monthly payments. Waiting longer to buy a home might lead to price increases or changes in interest rates, which could make homes more expensive. Choosing a high-interest rate would elevate monthly payments, and selecting an adjustable-rate mortgage without understanding the associated risks could lead to payment fluctuations that might increase over time, contrary to the goal of reducing monthly expenses. Thus, making a larger down payment is the most effective method among the options.

Making a larger down payment directly impacts monthly mortgage payments by reducing the loan amount that needs to be financed. When homebuyers make a larger down payment, they borrow less from the lender. Since monthly payments are based on the total loan amount, a smaller loan results in lower monthly payments. Additionally, a larger down payment can sometimes lead to better loan terms, such as a lower interest rate, further decreasing monthly payment obligations.

The other choices do not logically lead to a reduction in monthly payments. Waiting longer to buy a home might lead to price increases or changes in interest rates, which could make homes more expensive. Choosing a high-interest rate would elevate monthly payments, and selecting an adjustable-rate mortgage without understanding the associated risks could lead to payment fluctuations that might increase over time, contrary to the goal of reducing monthly expenses. Thus, making a larger down payment is the most effective method among the options.