![]() Want a fast, free rate quote? Quickly get matched with a top mortgage lender today! Let’s look at an example of the 20-year fixed to illustrate the savings: $200,000 Loan Amount While the 15-year fixed is the most common alternative, it comes with its own drawback, namely a much higher monthly mortgage payment that most home buyers can’t afford, especially first-timers. So what are homeowners to do? Well, the most common solution to this ”problem” is to look at a shorter-term home mortgage instead, such as a 20-year loan. Perhaps just 1.2 to 1.3X that of a 30-year fixed depending on rate.The monthly payment may not even be much more expensive.And results in a home that is free and clear 10 years earlier.A 20-year fixed greatly reduces the amount of interest due.Consider a Shorter-Term Mortgage Like the 20-Year Fixed And because you’d be paying it back so slowly, you’d pay a lot more interest over that time.Īssuming your loan amount is large, perhaps a jumbo mortgage, it could be the difference of many thousands of dollars versus a mortgage with a shorter term. If by chance they agreed, they’d want to charge you a higher rate of interest. ![]() Only mortgage lenders seem willing to do this. If you borrowed money from a friend and asked to pay it back over 30 years, they would probably say no. Yes, you pay a premium for the convenience of a fixed interest rate over three decades.Īnd since the mortgage takes so very long to be paid off, a lot more interest is paid and it takes forever to build home equity. They also come with the highest interest rates relative to other loan programs. When it comes down it, 30-year mortgages have some serious drawbacks, with the most obvious one being the long amortization period. ![]()
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