Wednesday, December 3, 2014

How Mortgage Interest Rate And Term Can Make or Cost You Thousands

Mortgage lenders toss around interest rate numbers as if they didn't matter.

They DO!

And to illustrate the impact interest rates can have on your overall financial picture, I’ve presented a sample table below showing the interest you pay over the term of a 30 year, $150,000 loan at 8%, 7% and 6%. 

      And here’s the clincher: Just ONE percentage point on a $150,000 loan can cost you almost $37,000 over the term of the loan!  TWO percentage points will cost you over $72,000!!

      Your banker might tell you his “slightly higher rate” is only a matter of $103 a month in payment.  But YOU should know better!  Take a look at the table below:

Loan Amount

$150,000

$150,000

$150,000
Interest Rate

8%

7%

6%
Monthly Pmt.

$1,101

$998

$899
Interest Paid

$246,233

$209,263

$173,757
Savings

--

$36,970

$72,476

      That’s money taken out of your pocket if you don’t look for good rates!

      And if you think interest rate has an impact on your overall financial picture, take a look at what modifying the TERM of your loan can do.

      Here’s another example of a $150,000 loan at 7% interest.  But this time, we examine the total interest paid when you select a 30-year vs. a 15-year vs. a 10-year amortization:

Term

30 Year

15 Year

10 Year
Interest Rate

7%

7%

7%
Monthly Pmt.

$998

$1,348

$1,742
Interest Paid

$209,280

$92,640

$59,040
Savings

--

$116,640

$150,240


      The “bottom line?”  Estimate the maximum amount of payment you can afford, and adjust TERM and INTEREST RATE of your loan to minimize the amount of total interest you’ll pay.

If you are not sure about buying a home and are scared of losing money or getting caught in a bad deal, empower yourself with information!

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