Financing a new home can be confusing; but a good reputable lender...
Financing a new home can be confusing; but a good reputable lender should clearly explain all of the terms & conditions of your new loan. You don't want to be house rich & cash broke.
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A fixed rate loan is simple your payment & interest rate never change throughout the life of the loan. This is a smart option if you plan on living in the home for a long time. One option for fixed rate loans is the length of the loan, typically 15 or 30 years. Both offer great interest rates; it comes down to your ability to pay it off in a shorter time. Many borrowers go with a 30 year because the payments are cheaper. However, a 15 year loan doesn't mean the payment will be double that of a 30 year. Consider this example:
- Purchase price of $180,000 with a 4% interest rate. For a 30 year loan, your payment will be ~$859 before taxes & insurance. For a 15 year loan, your payment will be ~$1331 before taxes & insurance. Thats a difference of $472 per month.
- Using the same terms above; you'll pay ~$129,365 in interest for the 30 year loan for a total of $309,365 (purchase price + interest: $180,000 + $129,365). For the 15 year loan, you'll pay ~$59,658 in interest for a total of $239,658.
- Thats a savings of $69,707 if you can afford to finance for 15 years.
When comparing offers from different lenders, you need to make sure you're comparing apples to apples. Purchasing a home is a long term commitment so ensure you're comfortable with the interest rate, payment, & term of your loan.
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Posted in Financial Services Post Date 11/17/2015