When you start looking for the right mortgage loan, you may want to consider taking a shorter-term loan if you want to save the most amount of money. If you choose this option, you will save money; however, your monthly payments will be higher, because you will be paying off the same amount of money in less time. Here are three ways you will save money, though, by taking a shorter-term loan.
The interest rate will be lower
If you compare the interest rates of 30-year loans to 15-year loans, you will find that 15-year loans always have lower interest rates. The interest rate you pay affects the monthly payments you make and the overall cost of the loan. Because of this, finding a lower interest rate on a loan is the first way to save money on your mortgage.
In general, the interest rates on 15-year mortgages will be between 0.25% to 1% lower. This is a big difference that you can take advantage of if you can afford the payments on a 15-year loan.
The overall loan cost is lower
Choosing a 15-year loan versus a 30-year loan will allow you to pay off your entire home in half the time. After 15 years, your loan will be completely paid off and the house will be yours. Not only is this beneficial for the time-frame involved, but it is also beneficial because you will save money simply by paying it off sooner.
Whenever you can shorten the terms of a loan, it will save you money because you will not be paying as much interest. The interest you pay is based on the rate and the length of time it takes for you to repay a loan, so paying it off in 15 years will help you save more money on interest costs.
Payments every two weeks can help you cut off more time and money
In addition, you may want to find a lender that will allow you to make payments every two weeks. With this option, you will be making 26 half payments each year, which is 13 full payments. This amounts to one extra payment per year, and doing this could knock off three years of payments. This means you could pay off a 15-year loan in only 12 years.
If you want to find out how much you can afford to pay for your mortgage loan, contact a lender today. This is a great way to find out how much you can borrow and the loan options available. For more information, contact a professional in your area or visit a website like http://www.republicstatemortgage.com
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.