Primary market

Do The Math Before Choosing A Mortgage

Have you ever analyzed the difference in monthly payments between mortgages with different interest rates? Everyone wants to get the lowest interest rate possible. Savvy borrowers will shop around, contact different mortgage lenders and try to negotiate for the best terms. But do they really do the numbers? Do they look at the actual monthly payment that each loan will require? For example, what do you think is better for a $200,000 loan: a 6 percent interest rate with one point or a 6.125 rate with no points? Keep in mind that a point is one percent of the amount loan -- or in our example $2,000. The monthly payment to amortize a $200,000 loan over 30 years at 6 percent will cost you $1199.11. (This is only for principal and interest; we are not including taxes and insurance in this example.) The monthly payment for that same loan at 6.125 percent will be $1215.23 -- or $16.12 more a month. But in order to get that lower rate, you will have to pay the lender the one point in the amount of $2,000. It will take you almost 124 months (over 10 years) in order to break even and reap the benefits of that lower rate ($2,000/16.12 = 124.07 months). How long do you plan to stay in your new home? Do you have better use for the $2,000 than merely to pay it to a mortgage lender so as to give you a slightly lower mortgage interest rate? These are questions all potential home buyers should consider when shopping for a mortgage.


Add your comment:
Name:
Site address: http://
Your message:
Enter today\\\\'s date, 2 digits
(spam protection):

News of the day
What If My Web Site Goes Black - Part II?
Buyer"s agent, Ernest Berkheimer, hasn"t had much luck on the Internet. One ISP after another has changed hands, including his IBM.net e-mail to AT& T. So he felt he needed his own domain and e-mail addresses. Then he found Homes.com. Problem solved - until yesterday, when he received the following e-mail from Homes.com CEO Tom Orsi, reassuring him that although the company is filing bankruptcy, he should not be affected as a customer.
Popular Articles

Realty Times Outlook - Housing Starts, Interest Rates Cool
Is real estate poised for another boom? The economy appears to be expanding, but not so quickly that inflation is a problem. That could mean steady-to-even-lower interest rates, that could impact housing favorably in the spring.
Known discount hotel Kiev Rus
San Diego Real Estate 2010 Forecast: The Year of the Strategic Mortgage Default
It would be easy to write a 2010 real estate forecast by repeating the industry line that “the new year will mark a turnaround for real estate values; those who act fast will be able to get the best buys.” Real world facts, at least in San Diego, seem to indicate otherwise.