FBLA Banking and Financial Systems Practice Test

Question: 1 / 460

What typically happens to monthly mortgage payments with a larger down payment?

They increase

They decrease

When a borrower makes a larger down payment on a mortgage, the principal amount of the loan decreases. Since monthly mortgage payments are calculated based on the total loan amount, interest rate, and loan term, a smaller loan amount directly leads to lower monthly payments.

Additionally, making a larger down payment may also result in a lower interest rate, as lenders often view borrowers who invest more upfront as less risky. This further contributes to a decrease in monthly payments. Overall, the decreased loan amount and potential for a lower interest rate are the key factors that result in smaller monthly payments when a larger down payment is made.

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They stay the same

They are not affected by down payments

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