Fixed Rates 10 year
When you’re looking at a mortgage, there are a number of factors to take into account. One of the most important decisions is the term of the loan or how long will you take to pay back the loan.
Traditionally, mortgages had 15 to 30 year terms. It makes sense with a big investment like a home to stretch out the payments over time so that the monthly payments are manageable.
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One of the biggest drawbacks to a long term loan is that amount that you spend on interest. For example, if you took out a mortgage of $175,000 for 30 years at 7%, your monthly payment would be $1164.28. That’s a manageable amount for a lot of people. But the big surprise is how much you will have paid in interest by the time you made your last payment. The total interest paid would be $244,140. That’s almost $70,000 more than the amount borrowed.
By cutting down the time you take to pay back the loan, you can cut the amount you pay in interest by quite a bit. Lets take the same loan we used above but now we’re going to pay it back in 10 years instead of 30 years. We have the same interest rate, 7%, and the same loan amount, $175,000, but now the monthly payment almost doubles to 2031.90.
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The big savings with a 10 year term is in the total interest paid. At the end of 10 years when you make your final payment, the total interest comes to $68,827. That’s less than a third of the interest on the 30 year loan and you own your house free and clear in only ten years.
For most people, it seems that the mortgage goes on forever but by cutting the amount of time, you can save a considerable amount of money. It can be a great savings and investment plan to increase your monthly payment and gain equity in your home quickly.
As with any investment, you should understand all of your options before you sign on to a mortgage. The loan term is only one factor of many. The interest rate, the amount of the loan, whether the interest rate is fixed or variable are all factors that determine how much you’ll pay every month. There are many mortgage calculators available on the internet. It pays to take some time and try different combinations to see what will work for you.
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