Total Cost Of Credit vs. Monthly Payments
I read a press release the other day which points to the fact we need to be very careful with our finances. The
subject of the release was home mortgages. A company was announcing the availability of 40 year mortgages for its
customers. The stated purpose was to lower the monthly payments to make buying a home more affordable.
Whenever I hear the phrase "more affordable", I put my hand on my wallet because the attempt to empty it will begin any moment.
Almost never is that phrase used in relation to the total cost of financing. It is always used in reference to the size of the monthly payment, as in this example.
Let's see what it really means. I did the math. A mortgage for a $100,000 home at 6% for 30 years would have a monthly payment
of about $600 for principal and interest. You would pay about $216,000 over the life of the loan of which $116,000 would be interest..
A mortgage on that same home for 40 years would be at 6.25%, with a monthly payment of $565. The payments over the life of the
loan would total about $271,200 and $171,200 of the total would be interest.
The forty year mortgage has a higher interest rate (usually between.25 and .50 percent) because the lender has his money at
risk for a longer time (Lenders are well aware that time is money. You should be as aware).
This higher rate coupled with the extra ten years of the loan, has the borrower paying 47% more interest, or $55,000 more over
the life of the loan. Even with a lower payment that supposedly makes it more affordable to purchase that home. Sounds like a pretty good deal for the lender.
Another problem the borrower faces is building equity much more slowly in the beginning of the loan. The extra interest
expense paid for the extended length of the loan prevents equity from building up quickly. All of this for a monthly payment that is only $35 less.
You need to think in terms of overall cost and not just monthly payments. The total cost is what you will give back to
your creditors. The focus on the monthly payment takes attention away from the total amount to be repaid. You need to look at this
with any indebtedness, car payments, personal loans, credit cards: figure the total cost, not just what you pay each month.
You'll begin to hear more about these loans I'm sure. Think long and hard before you lengthen your indebtedness. The goal is
to become debt free and to do it as fast as possible. Advise your families and friends to do the same.
MORE RESOURCES updated Wed. August / 23 / 2017
How to Get the Best Mortgage Refinance RatesMotley FoolHow can you get the best rates when refinancing your mortgage? Follow these steps to get a good deal on a refinance loan. Christy Bieber. (ChristyB). Mar 25, 2017 at 7:06AM. Homeowners who refinanced a $200,000 mortgage in the first quarter of 2015 ...and more »
RELATED MORTGAGE AND REFINANCING ARTICLES:
Financing the Purchase of Foreclosed Homes
Homes that have been foreclosed can be one of the most
economical ways to get into a nice home without having to
pay exorbitant costs. It's also a great way to get in on
the real estate investment game as a beginner.
No Deposit Home Loans
A few years ago, many of us would have had a light chuckle
to ourselves if someone mentioned that you could borrow
money to buy a house with only the promise of solid future
earnings. But today this is a regular occurrence.
How to Use a Home Equity Line of Credit Calculator
Most home owners know that the lower the interest rate, the
lower the monthly payments. But then the process may get a
Uk House Price Increases Take A Summer Holiday
Property website Rightmove has released its latest house
price index announcing a "Summer sale" for house buyers.
The report shows that on average, house prices fell by 1%
over the four weeks leading up to 9th July, indicating that
the "affordability gap" between house prices and buyers
ability to purchase, is at last starting to close.
2nd Mortgage Loan After Bankruptcy - Get Approved Online
A 2nd mortgage loan after a bankruptcy is possible in as
little as two years. Refinancing your mortgage can help you
make needed home improvements or pay off high interest
The Mortgage Loan Application Online - Save Time & Money By Applying On The Internet
"You can save time and money by applying for a mortgage loan online." This often touted tagline seems like a gimmick, but it's true.
Adjustable Rate Mortgages Offer Alternatives For Home Buyers
When looking for a mortgage to meet your needs, consider
these key questions: Is your income expected to increase in
the coming years? How long do you plan to live in your new
home? And, which mortgage will provide the lowest interest
rate? While 15 or 30 year fixed-rate mortgages are the most
popular, and Adjustable Rate Mortgage (ARM) offers some
interesting alternatives for home shoppers who plan to move
again within four or five years. Although interest rates
are the lowest they've been in 20 years, an ARM provides
even lower interest rates during its introductory period.
Mortgage Calculator - How to Calculate Your Monthly Mortgage Payment
Just starting to shop for a new home? Do you want to know
how to figure what your monthly payment would be based on a
certain priced home? No problem, there are plenty of
mortgage calculators on the web you can use free of charge
(click here for an example of one). All you need to know is
the mortgage amount, sale price less the down payment,
interest rate (also easy to access on the web), and the
number of years you wish to finance your new home, usually
30 years (360 months) is the maximum term.
Self Employed Mortgage Loan - Getting a Mortgage When You're Self Employed
Being self employed has many benefits. When you are self-employed, you can write off all of your deductions on your taxes.
Poor Credit Mortgage Reigns High Among Mortgages Available to Bad Credit Borrowers
Like a big brother keeping notes of the erring behavior of
his younger sibling, credit reference agencies like
Experian and Equifax maintain a record of each person
entering into credit transaction. While a few instances of
arrears are considered admissible, as the incidence of bad
credit behavior increases, creditors start considering
these as a lack of reliability.
Home Equity Loans Categories
Fixed Rate Mortgages: These loans have a fixed rate of
interest over the entire term for which the loan has been
disbursed. The term for these mortgages is typically
between 10 to 30 years.
Keep Your Eye Focused on Treasury Bond Rates To Adjust Your Current Mortgage Rates
Mortgage rates typically are based off the current rates of
treasury bonds. Most lenders set their long term mortgage
rates in line with 10 and 30-year treasury rates.
How To Save Money On Your Mortgage
Obtaining a home loan is arguably the most expensive
transaction you'll experience in your lifetime. Therefore,
getting the best home at the greatest value is an endeavor
Home Equity Loan - A Reverse Mortgage Could Provide a Comfortable Retirement!
While only comprising about 1% of all mortgages, the
reverse mortgage has gained in popularity in recent years.
Federally insured since the late 1980's, the reverse
mortgage allows owners of paid-off homes to borrow against
the equity in their homes in the form of a lump sum, a line
of credit, or in the form of monthly payments.
Mortgage Broker or Assassin? A Banker Who Offers You This Loan May be Trying to Kill You!
What if a banker or mortgage broker told you he's loan you
25 percent above the value of your home? You might think it
sounds great, but I sure hope you'd say no. This is a loan
only the most money-hungry and unscrupulous loan officers
How to Find a Good Online Homeowner Loan
A quickly growing trend in lending is the online homeowner
loan. This loan uses the equity that you have in your home
to secure the loan amount, and features both a convenient
way to apply and check on your loan as well as faster
decision times and lower interest rates than many loans
offered by more "traditional" lenders such as banks and
Zero Down Mortgage Loans - Is 100% Financing a Good Idea and Can You Get Approved?
Are you wondering if you can get approved for a home loan
with 100% financing? Are you also wondering if its a good
idea to get a mortgage loan with no money down? Here are
some points to keep in mind as you apply and consider your
different mortgage loan options. To qualify for 100%
financing on a purchase mortgage loan, it would be
important for you to have a credit score of at least 600 or
A Guide to Direct Homeowner Loans
Are you considering applying for direct homeowner loans?
Perhaps you're simply wanting more information on direct
homeowner loans so that you'll be able to make an informed
decision? Direct homeowner loans can be very useful for a
wide variety of purposes ranging from purchasing new
vehicles to consolidating old debts, but as with all loans
should be researched and carefully considered before any
final decisions are made. How direct homeowner loans
work. Direct homeowner loans are based upon the equity that
you have in your home? equity, of course, being the
percentage of your home's value that is free from any
mortgage or loan.
Save Yourself from Home buying Disasters
Whether you are a first time home buyer or a happy home
owner who wants to refinance an existing home loan, there
are some cardinal "dos" and "don'ts" to follow. For many,
home ownership is the biggest investment in their lives and
that could be the reason why some people act irrationally,
as if they purposely want to sabotage the deal.
How To Find A Mortgage With Bad Credit
Shopping online for mortgages ought to be trouble free,
even should you have poor credit or no credit score. You
can nonetheless find a bad credit lender that can
used office furnishings-supplies-equipment-desks-cubicles-service-counters for
sale in Akron Ohio
Die cast model cars for sale in Akron Ohio
used cars for sale in Akron Ohio
unfurnished homes for
rent in Akron Ohio
ARM compare rates find the best rates current in your area lenders read reviews calculator adjustable rate loan home lenders brokers
quotes florida houston gmac washington interest only 2nd software debt consolidation
reverse senior equity texas maryland options lending bad credit
option one ameriquest chase first banks emc residential california miami dallas est branch marketing
home company commercial yahoo online bad credit low credit no credit