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Save Money with a 20-Year Fixed Rate Mortgage Loan
By Karen Lawson
CMR Columnist
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When you start your search for the ideal home loan, you will soon learn that there is a loan to fit almost any situation. Perhaps you're in the market for a new home and don't want a 30-year mortgage, but the payments on a 15-year mortgage are a little too high. A 20-year mortgage can offer a lower APR in addition to interest savings.
Your Ideal Home Mortgage Loan: Identifying Your Priorities
Before your start looking for a home mortgage loan, it's important to identify your needs and wants in terms of lifestyle, financial circumstances, and goals for the future. Mortgage lenders, banks, and mortgage brokers offer a wide variety of loans that can accommodate many situations. For example, a 20-year fixed rate mortgage can save you money while allowing you to pay off your mortgage in time for retirement.
Why Should I Consider a 20-Year Fixed Rate Mortgage Loan?
Let's consider two mortgage loans: one for a term of 30 years and another for a term of 20 years. The amount of each loan is $300,000. You will likely realize a savings on the annual percentage rate, or APR, with the 20-year loan. A savings of a quarter point, is typical.
For our example, we will use a rate of 6.66% for the 30-year loan and 6.42% for the 20-year loan. Your payment for the 30-year loan would be approximately $1927.28. Your payment for the 20-year fixed rate mortgage would be about $2222.61, a difference of $295.33. For a difference of about $300 a month, your mortgage loan will be repaid ten years sooner!
As always, it's wise to consider several loan products before choosing a mortgage loan. A 20-year fixed rate mortgage may be the right choice for you!
Source
Fannie Mae
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage lending. She earned an MA degree in English at the University of Nevada, Reno.
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