FIXED RATE
Loan terms
vary from 10 to 30 (sometimes 40) years. The
longer the term
,
the lower the payment, but the longer the term, the more you will pay.
Over 90% of the mortgage business is based on the popular 30 year Fixed Rate. The 30-year fixed is a long-term loan (360 months). The payments are easy to make since this loan is stretched out for 30 years and is for the person on a fixed budget. You will qualify for more of a home with the 30-year mortgage term.
The monthly payment on a 30-year mortgage based on a $100,000 loan at 7% interest is $665.30. You will pay back a total of $239,508 if you keep this loan for 30 years.
The 15- YEAR FIXED has a shorter term and will save thousands of dollars on interest. Although the interest rate is slightly lower than the 30-year fixed, the payment will be higher due to the shorter term. The monthly payment of a $100,000 loan based on a 15-year term at 6.75% will be $884.91. You will pay back a total of $159,283 if you keep this loan for 15 years.
The difference between the 30-year and the 15-year is approximately $80,224 in interest. If you can qualify and can afford the 15-year fixed, it is the more desirable loan.
Dan
Palumbo, Licensed Mortgage Banker 800-817-8743
Licensed Mortgage Banker - New Jersey Department of Banking and Insurance; Licensed by the Pennsylvania Department of Banking; Virginia Licensed Mortgage Lender