The most popular payment choice is still the fixed, 30-year amortized mortgage. (Amortized is mortgage-speak, meaning the monthly payments reduce the loan to zero in the time agreed on.) If you qualify, you can also go 15- and 20-year payoffs and save big bucks in interest. In the last couple of years, many homeowners who bought their home on 30-year loans got a great deal refinancing. Dramatically increasing home values and falling interest rates enabled them to refinance to 15-year loans, get rid of PMI, and keep their new payments close to their old ones.
Interestingly, payments over 15 years are not double a 30-year loan but are about 30 percent higher. This is because 15-year programs usually get a half percent discount, and the mathematical fact that 30-year mortgages have more years of front-loaded interest payments. For example, a $150,000, 6.15 percent 30-year mortgage has a $913.84 monthly payment. Reducing the term to 15 years increases the payment to only $1,237.60, with a half percent discount. You will also save $106,214 in interest by taking a 15-year rather than a 30-year loan.
No comments:
Post a Comment