BY ANDERS HOSTELLEY – There is a great deal of discussion about today’s low 30-year interest rates. However, what many have not paid attention to is how low are the 15-year mortgage rates?
For example, a person with good credit can qualify for a 15-year rate of 3.875% (APR 3.93%). Now, you may say that you don’t like the higher payments that come with a 15 year loan, but you should look at how much interest you will save over the life of your mortgage.
For instance, for a loan of $400,000 that is refinanced today at 4.625% ( APR 4.604%) for 30 years the principal and interest payment would be $2,055.36.
This means over 30 years you would pay a total of $ 739,930.05, which includes principal and interest. For a 15-year term with an interest rate of 3.875% your principal and interest payment for the same $400,000 loan amount would be $2,933.75.
Yes, that is a payment that is $878.39 higher than a 30-year loan, but the total payments over 15 years amount to $528,075.00, or to $211,855.5 in interest savings compared to a 30-year loan.
Another advantage of having a 15-year loan is that by paying the loan down quicker you will have more equity in your home available for you to use in the event you sell your current home and upgrade to a larger home.
This piece was authored by Anders Hostelley, EVP Loan Origination Home Loan Manager for Honolulu HomeLoans, Inc. in Honolulu. See more at Website: www.HonHL.com