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How To Save Half On Interest Costs
|Save $100,000 on mortgage interest costs! Sound impossible? Not really. An old-time mortgage that is once again proving popular allows homebuyers to so just that. It is the 15-year fixed-rate mortgage that lets homebuyers own their homes free and clear in 15 years. And, while the monthly payments are somewhat higher than a
30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and importantly - the homebuyer pays less than half the total interest cost of the traditional 30-year mortgage. The purpose of this page is to help prospective homebuyers explore the 15-year fixed rate mortgage - a new option for saving on total mortgage interest costs.
The 15-year fixed rate mortgage has proved popular with two very different groups of homebuyers. First, it enables young homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage. The 15-year fixed rate mortgage gives them additional financing options using the house's equity. For example, they can easily take out a second mortgage if they want to make use of the equity in their home. But you need not fall into either category to appreciate the savings the 15-year fixed rate mortgage affords homebuyers. Let's take a closer look at some of the pros and cons of this type of mortgage and what savings you may expect.
The 15-year fixed rate mortgage offers the qualified consumer five big advantages.
The disadvantages associated with a 15-year rate mortgage are really the qualifiers that will tell consumers if this is the mortgage for them.
At right is a comparison of a $75,000 mortgage with terms of 15 and 30 years. We used a 15-year mortgage at a half percent lower rate, which is typical in today's market. As you can see, the 15-year mortgage saves more than $95,000 over the traditional 30-year loan.
|30-year at 10 percent||15-year at 9.5 percent|
|Monthly Payment (Principal and Interest)||$ 658||$ 738|
|First Year Interest Cost||$ 7,481||$ 7,023|
|Mortgage Balance||$ 74,583||$ 72,625|
|Fourth Year Interest Cost||$ 7,336||$ 6,244|
|Mortgage Balance||$ 73,052||$ 63,991|
|Total Interest Cost Over the Life of the Loan||$ 161,942||$ 65,970|
|Difference From 30-year Total||$ 0||$ 95,972|
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