|Loan 1||Loan 2|
|Total Closing Costs||$3,700.00||$5,700.00|
|Monthly Principal & Interests :||$1,342.05||$1,912.48|
|Total Monthly Payments :||$483,139.46||$344,246.98|
|Payment Savings :||$0.00||$138,892.48|
While shopping for a home mortgage loan, you will be presented with different loan options. Plugging this information into the loan comparison calculator will allow you to determine which one is the best option for you.
If your loan is for $250,000.00, you might be able to choose a 30 year loan with an interest rate of 5.000%, with 1.000 point(s), and a closing cost of $1,200.00. Or, you might be offered a 15 year loan with an interest rate of 4.500%, with 1.500 point(s), an origination fee of 0.50%, and closing costs of $700.00.
With the first loan option, your total closing costs will actually be $3,700.00, while the second loan will cost $5,700.00 at closing. The first loan would come to $1,342.05 per month and the second loan would be $1,912.48.
When all is said in done, you will also pay less with the second loan. In fact, you will SAVE $138,892.48 with the SECOND loan because the first one would cost a total of $483,139.46 and the second would be $344,246.98.
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Fixed-rate loans provide a stable monthly mortgage payment so you can create a steady budget. Unlike adjustable-rate mortgages, there are no surprises with fixed-rate loans, and you don't have to worry about your rate re-setting or your payment increasing.
When deciding on the type of fixed-rate loan that would be best for you, it's important to consider the advantages and disadvantages of each.
With a 15-year fixed-rate loan, you are likely to have to pay a higher monthly mortgage payment, but you will pay far less interest over the life of the loan.
For example, if you have a 30-year fixed-loan for a $272,000 home with a 4.5 percent interest rate, you will pay $224.146.26 in interest alone over the life of the loan. However, if you have a 15-year fixed-rate loan with the same terms, you will only pay $102,540.71 in interest over the of the loan.
Of course, you will pay a bit more on your monthly mortgage payment. For the 15-year loan, your monthly mortgage payment would be $2,080.78 (not factoring in other variables like property taxes and insurance), and your monthly mortgage payment on the 30-year loan would be $1,378.18. Though you will be paying more each month, you will be paying much less over the life of the loan, and you will be building equity in your home faster.
The primary advantage of a 30-year fixed-rate loan is that you can lower your payments to a more manageable level without having to take on a risky loan such as an adjustable-rate mortgage. The drawback is that it takes you much longer to pay back the loan, which can put you in a bind if you want to move or sell your home. If you haven't been in your home long enough, you may not have enough equity to sell when you're ready to leave. If you want to retire early, you may not be able to because you're still paying off a mortgage.
The 30-year loan is "slow and steady" for lower risk, but you may need a loan that allows you to meet your financial goals more quickly.
Not all fixed-rate loans are created equal. Variables such as interest rate and fees attached to each loan can make an apples-to-apples comparison difficult. However, you can use the above calculator to compare the terms on each to find out which would be the better choice to meet your financial goals. The calculator takes into account the interest rate for each, points on the loan, origination fees and closing costs to give you a comparison of anticipated monthly costs.
Even with the variation in terms, you can get a clear picture of what you would expect to pay each month and how much interest you would expect to pay over the life of the loan. Then you can decide if you would rather pay off the loan sooner or to keep your payments as low as possible, and which choice best meets your short- and long-term financial goals.