Shorter term mortgages, such as 15 years instead of a 30-year mortgage, usually offer lower interest rates so ultimately you will pay less for your house. The downside is that your monthly payments are higher, you just make fewer of them. This is not the same as an ARM which still takes 30 years to pay, but has the risk of fast rising interest after your ARM years are up. For example, a $100,000 15-year fixed mortgage at 5.5% costs $817/month and around $147,000 total. A 30-year fixed mortgage at 6.0% costs $600/month but takes twice as long to pay back, so it will cost you $216,000 when all is said and done.
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A LOZO expert posted this tip. |