Jimmy Kenley advises some clients to take shorter home loans to save money.
By Jimmy Kinley, Senior Loan Officer
(Ed: Denver mortgage rates are actually lower now in the 4% range for 30 year fixed home loans. But, the concept of saving hundreds of thousands of dollars is just as valid.)
I have been giving my clients more options when it comes to fixed mortgages these days with rates on 20yr and 15yr loans being so low. It only makes sense to accumulate equity more quickly and save money on total interest payments.
These scenarios aren’t for everyone. These scenarios are for those with some money down who are OK with a little higher payment if it makes smart financial sense. Here are some numbers on a $200,000 loan on a 30 year, 20year, and a 15 year.
30 Year Loan at today’s rates
| Loan Amount | $200,000.00 | |
| Annual Interest Rate | 4.50% | |
| Loan Period in Years | 30 | |
| Start Date of Loan | 12/1/2010 | |
| Monthly Payment | $1,013.37 | |
| Number of Payments | 360 | |
| Total Interest | $164,813.42 | |
| Total Cost of Loan | $364,813.42 | |
20 Year Loan at today’s rates
| Loan Amount | $200,000.00 | |
| Annual Interest Rate | 4.25% | |
| Loan Period in Years | 20 | |
| Start Date of Loan | 12/1/2010 | |
| Monthly Payment | $1,238.47 | |
| Number of Payments | 240 | |
| Total Interest | $97,232.55 | |
| Total Cost of Loan | $297,232.55 | |
15 Year Loan at today’s rates
| Loan Amount | $200,000.00 | |
| Annual Interest Rate | 3.88% | |
| Loan Period in Years | 15 | |
| Start Date of Loan | 12/1/2010 | |
| Monthly Payment | $1,466.88 | |
| Number of Payments | 180 | |
| Total Interest | $64,038.23 | |
| Total Cost of Loan | $264,038.23 | |
Sure, the payment jump from the 30yr to the 20yr is $226. Again, this isn’t for every client. I want you now to now look at the interest paid over the life of the loan. The 30yr costs almost 165K in interest, the 20yr around 97K, and the 15yr about 64K. Wow, those are powerful numbers.
Most homeowners keep there home around 5 years. So how much do they owe on the home when they call you 5 years from now to list there house?
- On a 30yr loan they owe $182,315.83
- On a 20yr loan they owe $164,629.07
- On a 15yr loan they owe $145,737.51
That sure does make your job easier!!
Do you personally have a 30 yr mortgage at 200K, with good credit, and equity in your house? Get this;
200K at 5.5% = P&I of $1135.58 plus taxes and insurance.
200K loan on a 20yr at today’s rate of 4.25% = P&I of 1238.47 plus taxes and insurance.
200K loan on a 15yr at today’s rates of 3.88% = P&I of 1466.88 plus taxes and insurance
Again this is for those people that are trying to get ahead of the curve and save tens of thousands of dollars in interest by only slightly increasing there payment. It isn’t for everybody but it might be perfect for your situation.
Jimmy Kinley
Senior Mortgage Advisor
License# MB100020560
Direct/Cell: (720)261-1410
Office: (303)987-4989
Fax: (303)987-4968
2 Comments
I think 30 year fixed will be 3.5% within the next 6 months what do you think?
If you are paying 3.5% within the next 6 months, then it is not desirable rate of interest. What say?