Real Estate Guide

Your Mortgage - Questions and Answers
'Term - 15, 30, and 40 Year Loans'

• What about a 15-year vs. 30 year loan?
• Are 40-year mortgages a good idea?
• What about splitting my mortgage in two and paying bi-weekly?

What about a 15-year vs. 30 year loan?

The difference in payments and overall savings between a 15-year fixed-rate loan and a 30-year fixed-rate loan depends on the interest rate and the loan amount.

Using a $100,000 loan and 7.25% interest rate as an example,

• Monthly payments on the 15 year note would be $912.86.
• Monthly payments on the 30 year note would be $682.18.

The 15-year note offers the opportunity to save considerable money over the life of the loan, since the period of amortization is half that of the 30-year note. This means that the total interest paid on a 15-year note as compared to a 30-year note is significantly less.

The actual calculation of  the overall savings of the 15-year note over the 30-year note depends on several individual circumstances, one important variation is the borrower's changing income status.

See >> Home Buyer's Top Ten Tool #7 - Mortgage Term Length Calculator helps you decide the term of your loan.

Are 40-year mortgages a good idea?

Smaller monthly payments are the primary advantage of adding 10 years to the traditional 30-year mortgage, but real estate experts say the shorter-term loan usually is more beneficial for the home buyer.

The drawback becomes apparent simply by calculating the cost of additional interest payments, which can total thousands for a few dollars difference in mortgage payments.

See >> Home Buyer's Top Ten Tool #7 - Mortgage Term Length Calculator allows you to see just how much more your 40-year mortgage loan will cost.

What about splitting my mortgage in two and paying bi-weekly?

See >> Real Estate Guide: Your Mortgage - Prepayment, Bi-monthly Payments.