15 or 30 year fix mortgage? Depends on how much Money you want to BURN

Mortgage and Lending with The Mortgage Network NMLS#244003 LMB#100008914

A common misconception buyers think is that a 15 year fix mortgage will be twice as much payment as a 30 year fix.

Lets consider the following example:

Purchase Price – $250,000

Down Payment 20% 

$50,000 Loan Amount

$200,000 Interest Rate

30 year fix – 3.5% Payment For Principal and Interest – $898.09

Finance Charge over 30 years – $132.311.97

  Now let’s consider a 15 year mortgage

Interest Rate 15 year fix – 2.625%

Payment For Principal and Interest – $1345.38

Finance Charge over 15 years – $42,168.18

As you can see from the above example, switching to a 15 year fix, you pay the mortgage off in half the time, save over $90,000. You are burning way less money! For the buyer who wants to pay off his mortgage this quickly, I would suggest doing so in a manner that is not going to put you in any sort of payment shock. Keep you Debt To Income Ratios under control, and put your future money to work for you in an interest bearing account, and live mortgage free Also, as a home buyer when you are out with your Real Estate Agent looking at properties, it might be wise to look at a lower price point home, with the thought of paying off the mortgage early, with the income you are making now. Life happens, and many of us think that we will make more money over time, get bonuses, windfalls, payouts, etc, and opt for a home that is out of there budget, and buy on emotion. It is much wiser, in my opinion to buy the home with the GOAL of paying it off. This way, when you are mortgage FREE on your first home, you can always TRADE up.

Cheers, Brian

Posted by
Brian Paul Quigley
Senior Mortgage Consultant, MBA
600 South Cherry Street, Suite 143
Denver, CO 80246
720 524 3215 - Office
720 949 5630 - Cell
303 547 3382 - Fax
www.brianquigley.com http://www.brianquigley.com/>
"When Service Matters"

Personal NMLS#244003
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Superior Service Since 1985, Serving Colorado, New Mexico and Southwestern Florida
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Comments (1)

Cliff Keith
Golden Gate Sotheby's International Realty - Redwood City, CA
Redwood City Real Estate

Good post Brian. I guess it really does come down to how much money do you want to burn. Great analogy and picture. Thank you for the information.

Feb 20, 2013 10:21 AM