Choosing This Kind of Mortgage Over The Usual 30-Year One, Might Save You a Ton Of Money
Because there are a lot of first-time homeowners who value being able to extend the time they make their loan payments, 30-year fixed-rate home mortgages have become the most popular in the housing market today. The loan entails paying the initial amount borrowed plus a fixed rate interest over the course of 30 years.
This is then followed by the 15-year fixed-rate mortgage which is preferred by buyers for the opposite reason. It entails the same terms of payment as its longer counterpart only shortened by half.
However, there’s another kind of fixed-rate mortgage which Idaho broker Gerald ‘Jerry’ Robinson suggests for people who may have different goals: the 20-year fixed-rate mortgage. And he gave a few excellent reasons why people should consider refinancing or buying into this middle-ground mortgage.
Paying Less Interest
For starters, going for a 20-year mortgage would mean being able to save a good amount of money from paying less interest over time. And in combination with the much shorter time for repayment, a buyer could expect to keep about $85,000 in interest throughout the life of a loan of $280,000. That’s a lot of money and is more than enough to add towards improving the home a borrower has bought.
What more, a 20-year mortgage turns out to give borrowers much more monthly affordable payment rates than a 15-year one while only paying for five years longer. This way, a borrower can still cut down their payment time while not having to stretch out their initial home budget plan.
A Decade Faster
People who have already committed to a 30-year fixed-rate mortgage but are looking to refinance their mortgage will also find switching to a 20-year one better than getting another 30-year mortgage and having to start all over again.
Going this route will better assure borrowers that they remain on track with their payoff goals, and have more time to actually enjoy the home they bought. What more, exchanging a 30-year mortgage to a 20-year one will be a more beneficial move when overall interest rates are down.
Matching Retirement Goals
A 20-year fixed-rate mortgage will also be a great choice for borrowers who are already in their late 30s or 40s and are planning to retire when they reach their 60s.
According to a survey done by the Life Insurance and Market Research Association (LIMRA), about half of the United States working force hang up their work boots between the ages of 61 to 65. Doing the math, a 30-year mortgage would simply not do considering their plan and would only keep them working well into their 70s which may not be ideal for some.
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