{"id":550,"date":"2010-06-10T20:12:42","date_gmt":"2010-06-10T20:12:42","guid":{"rendered":"http:\/\/www.michaeladeery.com\/blog\/?p=550"},"modified":"2010-06-10T20:12:42","modified_gmt":"2010-06-10T20:12:42","slug":"compare-the-savings-on-a-20-year-loan-vs-a-30-year-loan","status":"publish","type":"post","link":"https:\/\/www.michaeladeery.com\/blog\/compare-the-savings-on-a-20-year-loan-vs-a-30-year-loan\/","title":{"rendered":"Compare the Savings on a 20 Year Loan vs a 30 Year Loan!"},"content":{"rendered":"
There has never been a better time than now, for new buyers and existing homeowners to take a reduced term mortgage\u00a0that will set them up to\u00a0be mortgage free\u00a0for an earlier retirement.\u00a0Because of plummeting mortgage rates the\u00a020 year fixed loan is now at\u00a04.375% and the 15 year fixed is available around 3.99%.\u00a0 Today\u2019s record low interest rate environment is presenting just that opportunity.\u00a0\u00a0<\/div>\n
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Look at options to a 30 year loan<\/strong><\/div>\n
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I would say because of the really low rates recently, almost 40% of my clients\u00a0have been taking\u00a0reduced term mortgages in the past couple of months. The 20 fixed loan has been the loan of choice, as it has\u00a0an affordable payment payment\u00a0for\u00a0a lot more\u00a0clients with rates being so low.\u00a0The 15 year fixed payment is usually just a little\u00a0too high for all first time buyers. The idea of being mortgage free in 20 years and saving\u00a0more than a $100k in mortgage payments and interest\u00a0compared to a 30 year loan, is now becoming very appealing to\u00a0a lot\u00a0of buyers, as it opens up a whole new door of opportunities for retiring earlier.\u00a0<\/div>\n
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Educating homeowners with more options\u00a0<\/strong><\/div>\n
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I believe that now more than ever, we must be ready to take the time to truly teach\u00a0people what is happening in the market and why it is happening. Then, and only then, can they truly make the right decisions for themselves and their families.\u00a0Its important to show buyers and homeowners\u00a0why record low rates are presenting the opportunity of a lifetime to get a shorter term loan that will enable them to save more money and help them achieve their retirement goals a lot earlier.\u00a0<\/div>\n
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Compare the Savings on a 20 Year Loan vs a 30 Year Loan!<\/strong><\/div>\n
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Here is a great example that compares the total savings on a 20 year fixed loan versus a 30 year fixed loan.\u00a0For this particular example,\u00a0let’s take a $400k 30 year fixed loan at 4.875% and a 20 year fixed loan at 4.375%. The difference in payment is only $387 a month more<\/strong> for the 20 year fixed loan<\/strong>. I know this will be too much for some people, but it\u00a0will also\u00a0be affordable to a lot of people too.<\/div>\n
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Now lets compare the total mortgage savings on the 20 year fixed versus\u00a0the 30 year fixed loan, as you can see below the 20 year loan will save $161,175 in mortgage payments<\/strong> and interest over the 30 year loan<\/strong>. (See Net Savings)<\/div>\n
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Now lets\u00a0see what the balance of each loan will be after 10 and 20 years<\/strong>. As you can see after 10 years, the 20 year fixed loan has already paid down an extra $81,147 in principle. Now let’s look at the balances after 20 years…on the 20 year fixed the balance is $0, whereas the loan balance\u00a0after 20 years on the 30 year fixed is still $200,732. <\/strong><\/div>\n
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So the two huge\u00a0benefits here are\u00a0#1\u00a0the borrower will payoff his home 10 years early and get to retire earlier,\u00a0#2 the borrower will save over $161k in mortgage payments and interest.<\/div>\n
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Chat to family and friends about a\u00a020 year loan?<\/strong><\/div>\n<\/div>\n
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A recent\u00a0Wall St Journal\u00a0article noted that\u00a050% of US households have an interest rate over 5.75% on a 30 year fixed loan.\u00a0Have a chat with your\u00a0friends and family and ask them if they have a rate this high, or if they would be interested in looking at a\u00a0reduced term 20 year fixed loan and\u00a0becoming mortgage free for an earlier retirement?\u00a0<\/div>\n
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You can let them know that if they qualify, they would be able to refinance into a\u00a020 year fixed\u00a0loan at 4.375% or a 15 year fixed as low as 3.99%.\u00a0I would be happy to help out any friends or family you have and present the figures to them as shown above, so they can make an informed decision about their future goals. As\u00a0these record low\u00a0rates really present an opportunity of a lifetime for many homeowners and buyers who can now look to achieve retirement goals a lot earlier.<\/div>\n<\/div>\n
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An update on mortgage rates<\/strong>\u00a0<\/div>\n
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Mortgage rates are still edging downwards as investor cash continues to pour into the US bond market from around the world. Mortgage bonds actually had their new \u201cprice record\u201d (highest yields on record)\u00a0on\u00a0Monday the\u00a07th of June when the Fannie Mae 4.5%\u00a0coupon\u00a0priced out at\u00a0103.00 (see trading chart below). What does this mean to\u00a0consumers? It means that if these yields stay around this high 103.00 range\u00a0for the next\u00a0few\u00a0weeks or so,\u00a0and this becomes a solid new trading range, lenders<\/strong>\u00a0might<\/em> be offering 4.5% 30 year fixed rates across the board very soon<\/em><\/strong>.\u00a0What a fantastic opportunity this would be for new buyers and current homeowners who can refinance.\u00a0<\/div>\n
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BUT also do not discount rates spiking up either as we are in a very volatile market right now. It is\u00a0the Euro crisis that is driving everything lower including the US stock markets..Remember when stocks go down,\u00a0this causes bonds to up and mortgage rates rates in turn go down.<\/strong> But\u00a0<\/strong>if the Euro crisis starts to dissipate fast and the \u201cflight to safety\u201d of investor money to the US markets alleviates, then we will see rates rise fast.<\/div>\n
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Personally I don\u2019t see\u00a0rates moving too much higher\u00a0than they currently are for a few months\u00a0or maybe even longer, as the member countries in the Euro zone are only starting to acknowledge and realize that severe austerity measures need to be initiated immediately in most countries. This will be a long drawn out and painful process for many countries, as evidenced by the recent riots in Greece and current union strikes in Spain. So in summary, while the Euro zone continues to have problems, this will keep money flowing to the US bond and treasury markets, thus keeping US mortgage rates low and the US stock markets lower too.<\/strong> But\u00a0when you hear that the Euro zone is starting to get\u00a0its house in order, watch this as a key factor for rates to rise and US stocks to improve again.\u00a0\u00a0<\/strong><\/div>\n
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If you have any questions about any of the information above, please do not hesitate to contact me directly at 858-200-9602. I look forward to chatting soon.<\/div>\n
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There has never been a better time than now, for new buyers and existing homeowners to take a reduced term mortgage\u00a0that will set them up to\u00a0be mortgage free\u00a0for an earlier retirement.\u00a0Because of plummeting mortgage rates the\u00a020 year fixed loan is now at\u00a04.375% and the 15 year fixed is available around 3.99%.\u00a0 Today\u2019s record low interest […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[115],"tags":[],"class_list":["post-550","post","type-post","status-publish","format-standard","hentry","category-compare-the-savings-on-a-20-year-loan-vs-a-30-year-loan"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/comments?post=550"}],"version-history":[{"count":6,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/550\/revisions"}],"predecessor-version":[{"id":556,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/550\/revisions\/556"}],"wp:attachment":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/media?parent=550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/categories?post=550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/tags?post=550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}