15, 30 & 40 Year LoansAre 40-year mortgages a good idea?
Are 40-year mortgages a good idea? [back to top] 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.
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 a $100,000 loan at 7.25% fixed for 30 years would be $682.18.
Some people set on paying off their home loan early and reducing interest charges opt for a biweekly mortgage. Monthly payments are divided in half, payable every two weeks. |
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