FIXED RATE CONVENTIONAL MORTGAGES
Conventional mortgages with fixed rates are excellent choices for people with good credit and a minimum of 5% down payment, although we recommend a 10-20% down payment if at all possible. Your interest rate is fixed from day one and you know from year to year what your monthly payment will be. If you plan to stay in your house for several years and have the money saved for your down payment this is your best choice.
This type of mortgage comes in different lengths or terms. The most popular is the 30 year mortgage. This option gives you a lower payment because the payments are extended over time, but you will typically pay a slightly higher interest rate on the 30 year mortgage than on the 20 or 15 year mortgage.
As an example, if you were to purchase a home priced at $150,000 today with a 10% down payment, you would pay over the course of 30 years approximately $81,000 more for your home than if you pay the mortgage off in 15 years. Your payment on the 15 year mortgage would be approximately $1040 with an interest rate of 4.625% and, although your payment on the 30 year mortgage would be lower at $745, the interest rate would be higher, probably around 5.125% based on a 10% down payment.
We agree it is a significant difference in payment but in only 180 payments -- rather than 360 --you are mortgage free!
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