Buyers who have it with- in their means to be able to stretch a bit might want to consider a 20 year fixed-rate mortgage over the traditional 30 year plans. Not only will they pay off their mortgage note at an accelerated rate; but they would save thenselves approximately $70,000.00 plus over the life of the loan.
-A $200,000.00 mortgage; 30 year fixed- rate @ 4.75%; results in a monthly payment of $1043.00. Interest over the life of the loan will be $175,600.00
-A $200,000.00 mortgage; 20 year fixed-rate @ 4.75%; results in a monthly payment of $1265.00. Interest over the life of the loan will be $103,670.00. An actual savings of $71,930.00!
Choosing a 20 year note over the traditional 30 could be part of a sound financial plan for young homeowners who plan to have children. By choosing the 20 year mortgage not only would they not be making monthly mortgage payments, when their children reach college age, but they would also have a home that is “free and clear” if equity would be needed to fund college tuition and additional expenses.
Blog excerpted from article by Ray Martin