Long Term Fixed Rate Mortgages
Fixed-rate
mortgages are very popular because the
interest rate and monthly payments are
constant. Fixed loans are generally amortized
over ten, fifteen, twenty or thirty years.
A fixed-rate mortgage
is generally preferred when the interest
rate is relatively low and one intends
to keep the property for more than five
to seven years. When rates are relatively
high, or if one intends to sell the property
in fewer than five to seven years, adjustable
loans are generally preferred.
The most common fixed rate
mortgage is the thirty-year fixed. Borrowers
who want to pay off their loan sooner may
opt for a fifteen-year mortgage. If you
are trying to decide between a thirty-year
and a fifteen-year loan, consider the following:
Paying
your loan over fifteen years can
save you thousands of dollars in
interest. Paying less interest results
in less of a tax deduction. Determine
in advance if a larger tax deduction
(with a thirty-year loan) will offset
the benefits derived from paying less
interest (with a fifteen-year loan). |
 Mortgage Programs |
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| The payment
on a thirty-year loan can be substantially
less than the payment on a fifteen-year
loan of the same amount. You
could obtain a thirty-year loan and invest
the difference in mutual funds, stocks,
CDs, etc. If you could earn a higher,
after-tax rate on your investment than
the rate you pay on your mortgage, it
may be advantageous to invest the difference.
The final decision
you make will depend on your preferences.
If your goal is to live debt free, then
a fifteen year mortgage may be right
for you. If you goal is to maximize your
tax deductions, a thirty year loan may
be best for you.
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