15 Year Fixed Home Mortgage Rate Loan is Faster

If you make enough money and are willing to make a larger Home Mortgage payment each

month, then you might want to take a look at a 15 year fixed Home Mortgage rate loan.

15 year fixed Home Mortgage rates are always about a half point lower than 30 year

fixed Home Mortgage rates. For example, if 30 year fixed Home Mortgage rates are at

5%, then you can expect 15 year fixed Home Mortgage rate loans to be around 4.5%.

In the first ten years of any Home Mortgage loan, you are paying almost all interest.

For example, on a Home Mortgage loan of $200,000 at a fixed rate of 5% on a 30 year

term, your fully amortized (principal and interest payment) will be $1073. Of that

$1073, $833 is the interest payment. That means that only $240 of that $1073 payment

goes towards principal. As the fully amortized loan progresses, more and more of the

payment will go towards paying down the principal loan balance, but you can see that

by paying so much interest for so many years, you end up paying quite a bit more. In

the previous example, the total finance charge (interest paid) will actually total

more than $219,000 over the 30 year period. So for a $200,000 loan you will actually

end up paying $419,000.

The same $200,000 home loan at 4.5% interest rate (remember, half a point less) for a

15 year fixed Home Mortgage rate term instead of 30 year term will mean a monthly

payment of $1530. Of that $1530, only $750 will go towards interest while the

remaining $780 will go directly towards principal. This means that over the course of

the 15 year fixed Home Mortgage rate loan term, you will only pay $93,000 in finance

charges (interest). That is $116,000 less than the 30 year loan.

Do you think that you could spend $116,000 on something else instead of your home

loan?

The other big positive effect of paying your Home Mortgage quicker with a 15 year

fixed Home Mortgage rate loan is that you end up building valuable equity. Equity is

the difference between what you owe and what the home is worth. Assuming that the

$200,000 property you purchased fifteen years ago is now worth $300,000, you will be

able to accrue a total equity of $300,000 by paying off your loan quicker. This all

gets added to your net worth and will serve you well when you retire or if you decide

to leverage your property at a later date.