Hello everyone. And the rain continues in the great Pacific Northwest!
I recently saw a statistic that more borrowers are opting for fixed mortgages that are less than 30 years. The resurgence of the 15 and even the 10 year mortgage are telling.
It appears the homeowner's goal is to not have a mortgage down the road. To me, I think there's a flight to safety. People feel more secure if they know that someday they may not have a mortgage payment at all.
With this in mind, here is what you should be aware of regarding shorter term mortgages. For comparison's sake, I'm going to take a loan amount of $300,000 and compare your payments for a 30 year, a 15 year and a 10 year mortgage.
For a 30 year mortgage with a loan amount of $300,000 your principal and interest payment would be $1564.94 plus taxes and insurance at a rate of 4.75% today (4.815% APR) O.A.C. If you chose a 15 year rate and term instead your mortgage payment would be $2219 plus taxes and insurance at a rate of 4% today (4.111% APR) O.A.C.
For a 10 year mortgage your payment would be $3002 plus taxes and insurance at a rate of 3.625% today (3.784% APR) O.A.C. The number one thing you should ask yourself is what is your goal regarding your house? Sure, it's nice to pay off your mortgage early (32% of Americans own their home free and clear) but does that make the most sense for you?
You may want to consult a financial advisor or CPA so they can run the numbers for you as part of your larger plan. You should also include your mortgage loan officer in the discussion. A good loan officer can ask the questions that will help you make up your mind.
I trust this has been helpful to you. Feel free to contact me if you need further information. Thanks for reading!
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