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Fixed
Rate Mortgages
Fixed rate
mortgages are seeing a revival after two plus years of mortgage
meltdowns caused by the miss use of adjustable rate mortgages (ARM's)
and low rate teaser Option ARM's. The two most popular fixed rate
mortgages are the 30
year fixed rate mortgage and the l5
year fixed rate mortgage.
The
ABC's of 30
Year and 15 Year Fixed Rate Mortgages
As their name
implies, these two mortgage products, the 30
year
fixed rate mortgage and the 15
year fixed rate mortgage, are mortgages that have a fixed
interest rate on a mortgage loan amount that pays principle and
interest payments in equal amounts and is amortized over a 15 or 30
year period.
The
benefits of a 15
year
fixed rate mortgage are:
The
benefits of a 30
year fixed rate mortgage are:
A side by side
comparison of a mortgage of $452,000 at 5.75% interest shows the
following information:
15
Year Fixed Rate Mortgage
Borrower pays
no points
$452,000 @
5.75% = $3,753 per month
$672,632 in
total compensation with $222,632 paid to interest
30
Year Fixed Rate Mortgage
Borrower pays 1
point or $4,520
$452,000 @
5.75% = $2,638 per month
$792,439 in
total compensation with $340,439 paid to interest
As you can see
from our example, the difference between a 30
year fixed rate mortgage and a 15
year fixed rate mortgage is money; you will need to decide
which works best for you, a short term or a long term benefit.
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