The Majority of Home Buyers Opt for a 30-year Mortgage. Should you? <\/b><\/p>\n
Why do 86% of home buyers choose a 30-year mortgage over a 15-year mortgage?<\/p>\n
Even though a 15-year loan will carry a lower interest rate, and cost about 48% less over the long term than a 30-year loan, most borrowers look at the short term and choose the lower monthly payment.<\/p>\n
Should you?<\/p>\n
Here’s how it looks in actual dollars and cents: <\/b><\/p>\n
Say you’re purchasing a $250,000 home and putting 20% down. Your new loan will be for $200,000. Interest rates fluctuate from day to day, but we’ll say a 30-year mortgage comes with 3.68% interest and you can get a 15-year mortgage for 2.69%.<\/p>\n
That’s a hefty difference in a homeowner’s monthly budget. You could use that $433.23 per month difference to buy new appliances, go out to dinner more often, or even save for a vacation. Or \u2013 just save it.<\/p>\n
But look at what it will cost: <\/b><\/p>\n That’s a difference of $87,334.20.<\/p>\n The lower payment does give a measure of security against a day when you might not be able to afford the higher payment. So if you worry about a future job loss, illness, or fluctuating income, you may want to opt for the smaller payment and put the difference aside as a safety cushion.<\/p>\n Perhaps you know you won’t be staying in the house for 30 years, or even 15 years.<\/b><\/p>\n If you’re thinking that you’ll want to move in another 10 years, consider the impact on your loan payoff when you sell the house.<\/p>\n Paying that extra $433.23 per month for 10 years (120 payments) will “cost” you $51,987.60 and reduce your loan payoff balance by $80,046. That’s a savings of $28,058.40.<\/p>\n If opting for a 15-year mortgage is too frightening\u2026<\/b><\/p>\n Although you’ll be paying a little higher interest, you can do what young man of my acquaintance does. His monthly payment is $745, of which $237 goes to principal. By writing a check for an even $1,000 each month, he’s paying an extra $256 toward the principal and effectively more than doubling his payments during the early years of the loan.<\/p>\n Mike Clover<\/b><\/p>\n R.M.L.O<\/p>\n Homewood Mortgage,LLC<\/p>\n O: 469.621.8484<\/p>\n C: 469.438.5587<\/p>\n F: 972.767.4370<\/p>\n 18170 Dallas Parkway<\/p>\n Ste. 304<\/p>\n Dallas, TX 75287<\/p>\n","protected":false},"excerpt":{"rendered":" The Majority of Home Buyers Opt for a 30-year Mortgage. Should you? Why do 86% of home buyers choose a 30-year mortgage over a 15-year mortgage? Even though a 15-year loan will carry a lower interest rate, and cost about … Continue reading \n
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