Finding the right loan for you.

You might not think there are many options for you when looking for a home loan. You will be surprised to know that there are still ARM (adjustable rate mortgages) loans if you need them. The fact is that most ARM loans do not have better interest rates than fixed loans currently. If ARM Loans don't have lower interest rates then you are stuck with the 30 year fixed, correct? No. While rates are back down to historical lows, many customer are taking advantage of shorter loan terms like 15 and 20 year terms. These shorter terms offer slightly lower rates, but the biggest benefit is the savings on the "Total of Payments". Below I compare a $200,000 loan with an interest rate of 5.25% 30 year fixed mortgage and a $200,000 loan with an interest rate of 5% 15 years fixed mortgage.

Loan amount $200,000. 30 year fixed rate 5.25% Payment $1104.41

15 year fixed rate 5.00% Payment $1584.59

The Total of Payments is the payment x the terms of the loan.

30 year 360 payments x $1104.41 = $397,587.67

15 year 180 payments x $1581.59 = $284,686.20

The 15 year mortgage will save you $112,901.47 by the end of the loan term!!! I bet that will help you with retirement or putting the kids through college. The monthly difference is $477.18. One average car payment. Would you rather have a new car every 4 years or have your home paid off in 15 years? Having a home paid off in 15 years should be the American Dream. 15 year mortgages increase equity faster because you are paying down principal much faster. The first payment made on the 30 year mortgage above, only $240.00 goes towards principal. On a 15 year $748.00 goes towards principle!!! It is great to see more of your hard earned money going to pay off debt, not to interest to the mortgage company.

Many times home owners use the equity from their property to pay off debt and lower their monthly out going bills. While this is the cheapest way to consolidate debt (it may also be tax deductible), many home owners only look at the 30 year mortgage. The longer the term, the lower your payments are going to be. Assuming you can afford to consolidate your debt with a home loan, you should look at shortening your term. While it may look and sound good to save $500 or more monthly, does the BIG PICTURE of SAVING $112,901.47 in the example of the $200,000 mortgage LOOK and SOUND BETTER?


Please ask your Loan Officer about these options. There is not one answer for all clients, but shorter term loans should be discussed. Ask for a few Amortization Tables to compare the different loans you are looking at. You will be impressed with the savings a shorter term mortgage will provide.