Finding 15 Yr Mortgage Rates
If you have been keeping up with mortgage news, you will know that the 15 yr mortgage rates are quite appealing for consumers. However, does knowing mortgage rates really matter? We all strive to get a lower interest rate, but with most mortgage rates, the range in which you can get significant savings is still a lot higher compared to 30 year mortgage rates. Even if the 30 year mortgage rates have lower APR compared to a 15 year mortgage, the savings are still considerably better in the latter part. How come?
First off, we often look at interest rates in a monthly aspect. If we look at the monthly aspect, you will see that higher 15 yr mortgage rates could mean very high payments each month since the balance and compounding interest should be paid for within a span of 15 years compared to 30 years in which the payments are dispersed rather thinly. If you look at the 15 yr rates that way, you will never have an appreciation for it because you will always pay higher if you choose a 15 year term. That is why we have to look at it in a more long term aspect.
To prove that the 15 year mortgage rates can still generate more savings even at a higher rate than 30 year mortgages, let us assume that your mortgage rates range at 8% while 30 year rates are at 6%. With a loan of $100,000, your first 5 years for the 15 year mortgage would be very tough since you will already pay around $36,000 worth of interest at $956 monthly payment. For the 30 year mortgage, you pay only $22,000 at a $600 monthly payment. Sounds discouraging? Let us go even further. At the end of the term, you would accumulate only around $72,000 of interest for your $100,000 loan on a 15 year term at 8.00% while a 6.00% interest on a 30 year term would go beyond $100,000.
How come? Well, first, you have the advantage of time with the 15 yr mortgage rates. You pay more every month and you deplete your balance faster and that means the amount of times the compounding interest will adjust is a lot lower compared to paying within 30 years. Thus, in theory, the mortgage rates will offer magnificent savings for the borrower. We say “in theory” due to several factors to consider. Maybe you are planning to retire; maybe you have a very tight budget. You might be at the brink of financial troubles. When these factors are considered, you also have to take into consideration the short term consequences of the 15 yr rates. Sometimes, we have to think of the present before the future. Thus, the success in getting 15 yr mortgage rates would only be ideal if you have a pretty secure financial condition.
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