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Over 20 years of  Real Estate lending experience
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20 Year Loan Advantages
 

For those who want a lower interest rate and want to own their homes free of debt sooner, this shorter mortgage amortizes principal and interest over just 20 years, saving a considerable amount of total interest paid over the life of the loan.

Out of all the fixed rate loans available, the 30 year loan has always been the most popular.  It allows for the lowest payment of all the fixed rate loans, which is helpful if you are just starting out in your first home, or have moved up to a more expensive home with a higher mortgage amount.  However, if you have just a bit of extra cash to spare every month, it may be worth investigating the 20 year home loan option. 

Take for example a loan amount of $100,000 @ 5.75% for 20 yrs.  For these purposes, we will use a 5.75% interest rate, but keep in mind that a 20 yr loan would be at a slightly lower interest rate than a 30 yr loan.

30 year loan payment would be $583.57

20 year loan payment would be $702.08 (payments 17% higher than 30 yr loan)

15 year loan payment would be $830.41  (payments 30% higher than 30 yr loan)

As you can see, the 20 year loan has payments of just $119 per month more than the 30 yr loan and it takes a huge amount of years (10 to be exact) off the life of the loan.

The 15 year loan has payments of $247 per month more than the 30 year loan, but when compared to the 20 year loan, the payments for a 15 year are $128 per month higher for just an additional  5 years extra off the life of the loan.

How can this be?  It is because the prepayment effect reaches a point of diminishing returns around the 20th year.  As you shorten the mortgage below 20 years, it gets harder and harder to shorten the life of the mortgage without making the payments substantially higher.

Contact me and we can explore your options together. Or fill out the FREE, No Obligation Pre-Qualify form and take the first step.

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