Fixed Rates 20 year
A home is an expensive purchase. But the real cost of your home isn’t in the what you pay the seller, its in what you pay the mortgage company.
The amount of money you negotiate with the seller is just one factor. The total amount of your monthly payment will be determined by that amount, the amount you put down, the interest rate, the closing costs and the term of the loan.
It’s a good idea to shop around for the best interest rate. Different lenders will have slightly different rates depending on the current prime rate, what part of the country you live in and your credit rating.
The closing costs are also another factor that you can minimize. Make sure that you know what you will be charged and why. Sometimes low interest rates are offset with big origination fees or points charged up front. A point is equal to 1% of the loan and often this will be rolled into the loan amount.
After you’ve done your homework on all of those factors, it’s time to think about the length of time you’ll take to pay back the loan. Most mortgages are for 30 years. This makes for a low monthly payment but the cost of interest can be considerable.
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If you pay off your mortgage soon, the savings in interest can be considerable. Lets compare the total interest paid where the only difference is the amount of time taken to pay off the loan. A $150,000 mortgage at 7% interest has a payment of $997.95 if the loan is for 30 years but if you take out a 20-year loan your payment goes to $1162.95.
By adding that small amount to your monthly payment, you save big on the total interest you pay. The 30-year loan will cost $209,263 but the 20-year loan will cost only $129,107. And, with the 20-year loan, the house will be yours ten years sooner.
It pays to take some time and explore all your options before you take out a mortgage. There are many mortgage calculators available on web sites. Use them to play around with the numbers before you talk to a loan officer. You can walk into the deal knowing more and that makes for better decisions.
Taking even 5 years off the life of your loan can result in substantial savings.
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