How Do You Build Home Equity?

11 Ways To Effective Build Home Equity

Home equity is really booming these days.

At a final glance, that total equity on mortgaged properties was approximately $10 trillion with approximately $6 trillion being tappable, according to Black Knight’s recent figures.

Yes, this is a “T and not a “B.” However, just a couple of years ago, you would never have guessed this.

During the early 2000s, everything was all about tapping into your home’s equity line a cash-out refinance or line of credit.

The using your home as an ATM thing for making lavish purchases to just to pay your bills every month.

This resulted in the narrative quickly changing to foreclosures, loan modification programs, underwater mortgages, negative equity, declining equity and so forth.

Funny how this works.

The reversal of fortunes was caused by zero-down mortgages and crashing home prices, many of which were not underwritten properly to start with.

Most of the people who ran into problems buying houses at unsustainable prices at the height of the market, while also relying on 100% financing at the same time to close the deal.

That causes many homeowners to consider walking away or to leave, as housing price depreciation became the leading driver of defaults.

However, for many people who stuck around and were able to ride things out, they are in great shape actually and in a much better position now than they were when they took their mortgages out initially.

However, the housing crisis negative effects are still being felt by others even after double-digit house price gains for many years.

If you happen to be one of these homeowners, or maybe you are not but either way, you might be wondering how some home equity can be built.

This way, when it is time for you to sell your house (or refinance the mortgage), you will be able to do it worry-free.

So let’s check out some of the many ways that equity can be built in your home:

  1. Increasing housing prices – whenever prices of houses go up, your equity will increase simply due to the fact that your property will be worth more money. For example, if the current worth of your house is $100,000, and then in five years it increases to $125,000, you will have an additional $25,000 in equity. Unfortunately, as we are all aware, the opposite may occur as well.
  2. Decreasing mortgage balance – Each month, as you are paying your mortgage off, you are paying a portion of the principle (assuming you don’t have an interest-only home loan) and a part of interest. So you gain some home equity with each mortgage payment that you make.
  3. Larger mortgage payments – If every month you make bigger payments, and the extra part goes towards paying down your principle, you will pay your mortgage of much more quickly and increase your home equity much faster. Effective and simple.
  4. Biweekly mortgage payments – With a biweekly mortgage payment plan, throughout the year you make a total of 26 half payments. That will help to shave your mortgage term down save you lots of interest, and also help with building your home equity much faster as well.
  5. Shorter mortgage term – It is also possible to refinance into a mortgage with a shorter term and lower interest rate, like a 15-year fixed mortgage, which due to the bigger payments will result in equity being built much faster compared to when a traditional 30-year mortgage is used.
  6. Avoid refinancing- On the other hand, if you pull out ash and don’t refinance, all of the equity will be retained in your house. During the boom period, numerous homeowners continued refinancing over and over again until all of their equity has been sucked completely dry.
  7. Home Improvements – Making smart home improvements, when the expected value is more than the cost, it will increase the equity in your home through owning a house that is worth more. Although it appears to be the exact same home, stainless steel appliances and quartz countertops draw buyers in still, so you may able to sell your home for a higher price. If you use sweat equity this can even be done for free.
  8. Maintenance – You can be rewarded for keeping your house in top shape when it is time to sell your house. You will be able to sell it for more, as a result since more equity has been created in your house. Frequently home buyers will put in repair requests with sellers, but it will be harder to ask for concessions if your home has been taken good care of. 
  9. Curb appeal – The same thing is true when it comes to home staging. If your home looks good when it is listed, there is a higher chance that it will and for more money. Simple things can really make a huge difference, like lack of clutter, basic cleanliness, flowers, plants, bright lighting, carpet, new paint.
  10. Rent your home out ) When all or part of a property is rented out, you can build equity through using the rent that you get every month from your tenants. It is pretty sweet when someone else is paying your mortgage off, especially when your property is appreciating at the very same time.
  11. Larger down payment – Putting down a bigger downpayment, to begin with, will help you acquire home equity automatically and help to build it more quickly.

Although it may seem as if you are putting money into an illiquid form of investment, having more equity also means having a loan-to-value ratio that is lower, which might result in a lower interest rate, with no mortgage insurance required and make it easier to get financing.

A lower mortgage rate over time will result in you paying less interest and accruing more equity.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695

Good Prices For First Time Home Buyers Loans In Texas?

What Is a Good Price for a First-Time Home Buyer? 

Part 4

Finding That Perfect Price For A First-Time Homeowner

There is something that we must all consider and that is known as payment shock, which is basically a large increase in monthly liabilities.

An example of this would be if your housing payment went up 200%, that would be a shocking experience! Imagine paying $1,000 per month for a rental only to have to pay $3,000 per month the next.

You more than likely are beginning to understand what type of situation you are getting into.

It is always going to be better to stay under budget as it is going to take time to deal with the larger costs of owning a home.

This is true once you begin to see all of the other bills associated with owning a home such as that much larger electric bill.

Many times when looking at a home, we tend to over exceed our budgets, which means you have to have a budget ready to go.

Starter Or Forever Home?

Most home buyers usually look for a starter home to begin with.

Typically with time, they will move up to a larger home.

However, one must understand that there are many transaction costs involved in the purchase of a home.

You may consider that buying your forever home right from the get go is a more sensible solution.

Taking the budget out of the equation, it is still not that simple of a process. Home purchases are not only an expensive transaction they are highly time-consuming.

While the cost to close a home is rather expensive, you can expect the process to be rather lengthy.

In addition, it can be just as expensive to sell a home, one must consider repair costs, closing costs, real estate costs, and other associated fees.

In the simplest terms, buying and selling a home is an expensive process, so limiting the experience may be a good one.

If you have the funds, you may just want to look for a forever home and bypass the whole starter home process.

Many millennials have started with this trend and feel as though it is working out for them.

However, statistics have shown that few people stay in the same location for extended periods of time. For many people, they tend to stay in one home for ten years or less.

This just may ruin the fixed mortgage vs. ARM, however, that is a discussion for another day!

You will just have to weight the proc and cons of a starter home vs. forever home to decide what is best for you.

A starter home is going to be your cheaper option in the beginning, however, a forever home may be the cheaper alternative in the long run.

One must simply take the time to decide what is going to work the best for their finances and options at the time being.

In many cases, starting with a starter home is the only way people are able to save up and generate a down payment for their larger home in the future.

However, what do you do if you want to bypass all that and simply buy one home? It helps you avoid a lot of excess costs and headaches.

Plus it gives you a home that you can grow into as a family. In addition, you are not going to find the same level of competition with a forever home as you would with a starter home, so no bidding wars to contend with.

It seems as though that is the best way to go, doesn’t it?

However, this is one of those cases, where it is easier said than done. In all reality, you more than likely will get tired of that home and end up moving down the line.

You are going to find that it can be hard to find a home that is going to match all the various stages of your life at one time.

The Price Depends On Your Needs

There is not one price that is going to fit everyone for their first home.

It is going to vary depending upn your needs and affordability.

However, it is always wise to look into your future before you make that initial purchase.

Be sure you try to negotiate on the price of the home when you find the right one.

Keep in mind, depending upon your needs and wants is going to have an impact on what you pay.

For every location and number of bedrooms and bathrooms that are required will impact your bottom line.

There are going to be times where your price point and what you need and want are not going to add up and you are going to have to find a way to make things right so you can afford something.

If you do have the extra savings and some wiggle room, you very well may be able to afford your forever home today as opposed to ten years from today.

However, you will still be limited by the amount of homes that are in the market.

Price is always going to be determined by square footage, number of bedrooms, desirability, and of course the location.

Every individual is going to have various needs and find out what they are able to afford is quite different.

Basically, there is not one right number to this equation. It is simply a matter of what you can afford and what is available. As well as how many times you are willing to go through this process.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 click here to go to the first article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 3

Today’s Rates

Those who are buying for the first time might want to aim for prices close to these levels, since starter homes are usually cheaper than others. Having said that, it’s always so simple.

Individual housing markets across the country have a variety of home prices, and a lot of cities fall over the median.

Another thing that is a limiting factor is the homebuyer’s finances because there’s no way to buy more than you can afford to borrow.buying your first house in houston

The mortgage lenders and banks will go through your income, your assets, and your down payment, and they’ll tell you that you can only borrow so many dollars.

You can’t exceed your upper bound, but you can find out what it is by going in to get a pre-qualification or even a pre-approval.

You might dream of buying a home that’s worth $1,000,000, but your finances might ground you to something that’s $400,000 at most.

It’s still a good starting point, given that you’ll have established what your affordability and personal price ceiling are like. It also means that when you spend time on Redfin or Zillow, you can just set the maximum filters at $400,000 so that you don’t see anything above that.

If you find yourself not wanting to deal with anyone personally, you could choose to put your financial numbers through some mortgage calculators, but you need to be mindful of the fact that these aren’t nearly as accurate.

In either case, you need to look at things other than money, given how there are other factors in play. They include but aren’t limited to the features you’ll require, how long you intend to live in the home, why you want to buy to start with, and so forth.

Do You Hope To Live Above, Below, Or Just At Your Means?

Do you have fun making do with less? Or do you spend until you’re broke? There’s no law that says you must spend the full maximum that you can afford.

Many find it sensible to stay under their maximum so they walk away with a safety net for things that they can’t anticipate.

Let’s go back to our previous example, where you qualified for a maximum buying power of $400,000. It’s useful, certainly, although that doesn’t mean it’s mandatory to spend all that.

You have credit cards, right? Some issuers will give you credit lines up to $25,000. Did you run out and spend all of that? Unlikely. I doubt you even got close.

That number is just what they’ve figured out from your employment, income, and credit history.

Mortgage lenders also do this, using things like proposed down payments and debt-to-income ratio in order to determine your maximum purchase price.

Again, is spending that much even a good idea? Chances are good, particularly if it’s your first time, that you might be smart to aim somewhat lower.

Consider that homeownership typically comes with a lot of unexpected costs, although seasoned homeowners might not think of them as unexpected at all. However, if you’re a first-time homebuyer, they might just shock you.

Even your monthly bills for home maintenance can keep you up at night. If you weren’t already paying for trash, gardening, water, insurance, and other utilities, and now you suddenly are, it can be a jolt to you, and your bank account.

Also, don’t forget that property tax bill or your monthly mortgage payment. There’s also that new furniture you need to buy. You might even have a baby coming into the picture. It’s a lot to deal with!

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 click here to go to the next article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 2

If you have credit cards, then you know that issuers give you credit lines you can spend. Some cards might give you as much as $25,000. Should you actually go out and spend every dollar? No, you shouldn’t, and you probably never came anywhere close to that if you had such a card.

That $25,000 is just what they figured you could safely handle after they went through your reported income, your employment history, and your credit reports.

buying your first house in houstonYou can expect mortgage lenders to do much of the same thing. They’ll figure out your max purchase price based on factors like debt-to-income ratio and the down payment you’re willing to make.

This is no different than a credit card in that you shouldn’t spend it all. It’s a smart money move to aim for a home that costs less than your upper bound, particularly if you are buying for the first time ever.

Owning a home has a lot of costs that you might not know about yet. Veteran homeowners know about them, but if your history is in renting, then you don’t.

Just the monthly overhead that keeps your home up can be daunting. If you rented, you maybe had the rent, the power, and the cable or Internet, and some apartments even throw those in these days. You weren’t paying for maintenance, water, trash, landscaping, insurance, or property taxes.

Forget the monthlys. What about the furniture? What about the new baby coming? Oh boy! You also have to factor in something known as payment shock, and that’s basically a big jump in monthly liabilities.

For instance, should your housing payment double, it will stun you. If you had been renting for a grand each month and now owe triple that every month, then you might hear concerns from an underwriter.

You need to be concerned too. At the very least, recognize what you happen to be getting into here.

What’s A Good Price For First-Time Homebuyers?

Trying to buy your first home can make you want to pull your hair out. No matter how much you pay, you’ll lose sleep for a few weeks, if not longer.

When I bought my first home, I buried my head under pillows and stayed there as long as I could every morning. I was stressed out beyond belief.

I eventually talked to one of my friends, and brought it up. He told me that if I was anxious over what could happen, then I was halfway there already. I was told in no uncertain terms to chill out. I tried. I really did try.

You’ll Find Out The Most You Might Afford From Your Lender

Start the process by visiting your bank or a mortgage lender.

Many of them offer pre-qualification or pre-approval letters free of charge and without any commitment on your part.

They’ll look at your finances to figure out how much they can afford to lend you.

This will establish how much you can spend when you hunt for a home.

Data from the National Association of Realtors looked at the national median prices of single-family homes in the fourth quarters of 2017 and 2018. They went from $247,800 up 4% to $257,600.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 click here to go to the next article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 1

Buying your first-ever home can get rather nerve-wracking. No matter how much you pay, whether that feels like a lot or a little, you’re going to have some nights early on where you can’t sleep.

When I first bought a place, I buried myself under my blankets and didn’t come out for a while, and that happened for more nights than I want to admit. It was very stressful.

I even talked to a friend about this, and he told me that if I was worrying about what-ifs, then I was practically already there. He told me to chill out, okay? I got it.

The Lender Tells You How Much You Can Afford

Your first stop is probably going to be a mortgage lender or bank.

You might get a pre-approval or pre-qual letter free of cost or obligation.

You can use that to determine how much you can afford just based on your current finances.

That will at least set up a price ceiling you can use as an upper limit for your home search.

There’s no universal answer that suits everyone, but we’re able to talk about underlying stuff that comes up with solutions that work for you.

buying your first house in houstonThe National Association of Realtors has data that claims the national median home price for an already existing home for a single family during the last quarter of 2018 was $257,600, which was up 4 percent from the previous year, when it was $247,800.

First-timers might want to look for prices close to these points because starter homes usually fall on the cheaper side of the price scales. Then again, it’s not always so simple.

Home prices in different housing markets around the country are all over the place, with a lot of cities being over the median.

Also, your finances will factor in since they will limit just how much you’re able to afford, and there’s no way around that.

The mortgage lender or bank is only going to let you borrow so many dollars based on your down payment, income, and assets.

That means you could just visit to get your pre-approval or pre-qualification so you can know just how much you are able to afford. This is known as an upper bound, meaning you know you can’t exceed it.

Even if you’d like to purchase a million-dollar home, you might wind up getting limited to properties worth $400,000 because of your finances.

This is a good start since you at least have a pretty good idea what your price ceiling and affordability are. It means you’re able to set your filters on things like Zillow and Redfin so they don’t exceed your purchase price of $400,000.

If you’d rather not talk to anyone, you can even just run numbers on your own through a mortgage calculator, although odds are that it won’t be nearly as accurate.

Either way, you should look past money because there are certainly other considerations, like why you’re buying to start with, just how long you intend to stay, the features you might need, and so forth.

Do You Plant To Live Within, Below, Or Above Your Means?

Are you a frugal soul that enjoys getting by with less? Or do you swing for the fences? It’s not necessary to spend the full maximum that you’re able to afford.

It can even make some sense to buy under so you wind up with a safety net that can cover unexpected costs.

Using the instance from earlier, assume you only qualify for a maximum purchase price of about $400,000. It’s helpful, sure, but it also doesn’t mean that you should spend it all.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 click here to go to the next article in this series.

Are 30-Year Fixed Mortgage Loans In Texas In Danger?

Should We Worry about the 30 Year Fixed Mortgage

Part 2

Calabria Used a 30-Year Fixed Mortgage

Investigative reporting done by The Wall Street Journal has shown that nominee Calabria actually has a 30-year fixed loan on his current residence, which was bought back in 2010. At that time the rate range for these types of loans were anywhere from 4.23% to 5.10%. Rates did drop after that, and he may or may not have taken advantage of a re-finance, another reason these loans and their terms are so popular.

In addition to this it is worth noting that Calabria’s public testimony has no mention of these loans in his prepared remarks. He also re-affirmed that he will be serving Congress and not imposing his own view on how things should be done. While some of this should be expected no matter what when it comes to public hearings and testimonies, it does seem like this is a topic that would come up if a major part of his vision was putting these loans on the chopping blog.

All Smoke Or Is There Any Fire?

As always, it’s hard to know for sure how this is going to work until everyone is in place and actually on the job. While it makes sense to have concern, but at the end of the day based on the reporting right now, this is probably more of unnecessary worry than actual legitimate concern for the pro-30 year loan crowd. In today’s economy few want to take the risk of big or wholesale changes unless they really are confident in this being a necessary change to avert disaster as well as having a clear plan in place to defend against public criticism or importance. The idea that a loan program that is involved in 90% of home purchases & 80% of all mortgages will change or disappear overnight. Even if an adjustment is made away from these loans, this is definitely going to be a long-term shift. That makes the “sudden disappearance” of these loans very unlikely. In the end a major point to consider is that most homeowners only stay on a property for 5-10 years before they move to a different property. Paying more for an interest rate they won’t keep for close to 30 years just doesn’t make sense.

Mortgage Lending Texas team consists of mortgage professionals all over Texas. We are committed to providing our clients with the highest quality service for your mortgage needs. Combined with the lowest rate and multiple loan programs available in your area – Spring, San Antonio, Tomball, The Woodlands, Dallas, Austin and Houston, Texas. Our outstanding mortgage professionals with years of experience will work with you one-on-one to ensure that you get the home loan that is tailored specifically to meet your situation and expectation. Whether you are purchasing your dream home, first home, refinancing an existing loan, or consolidating debt, our highly experienced team of loan officers can help you find the right loan program at the lowest rate possible.

Our ultimate goal is to create a lasting relationship with each of our clients that we may continue to provide excellent service for many years to come. Unlike many of the larger nationwide mortgage companies that are out there, all your information will be kept secure and private. Our name is trusted throughout the lending community.

 

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 Click here to go to the first article in this series.

Are 30-Year Fixed Mortgage Loans In Texas In Danger?

Worry or False Flag: Is the Popular 30 Year Fixed Mortgage Loan Going Away?

Part 1

The 30 year fixed mortgage has been a mainstay of home buyers for decades now, and for most people who don’t follow financial news or the markets it can be easy to believe it will be around forever. But is that true? While it’s not saying anything controversial to suggest this is the most well-known loan as far as terms and long-standing use, that doesn’t mean the model will stay viable forever.

Back in 2014 some fretting about the 30 year fixed mortgage because when Dick Bove made the attention gathering claim that the Fed’s decision to taper off purchasing mortgages would make those loans non-viable going on in the future. In other words, it might actually be curtains for this loan program – and that caught plenty of attention.

So Should We Kiss the 30-Year Fixed Mortgage Good-Bye?

There’s a lot of controversy over this idea. Seeing as how the terms and affordability of the 30 year fixed mortgage allowed home ownership to become so widespread, it’s kind of hard to imagine a modern lending world where this is not an option. Is this something to actually worry about, or is it just fear mongering and paranoia?

While only time will tell, it does seem that every few years speculation fires up about Fannie Mae & Freddie Mac. These agencies are government controlled and have been since the 2008 collapse. They have long been a necessary part of the economic process to back these loans and make them a viable option that banks are willing to embrace because of the backing that comes from those agencies. In other words, they play the “Middle Man” that allows the process to work smoothly.

However, Mark Calabria, the most recent nominee to become FHFA (Federal Housing Finance Agency) director may decide he doesn’t like government purchasing 30-year fixed mortgages. If the order comes to stop buying those loans, the un-doing of Fannie and Freddie could take place. These two organizations back the majority of all 30-year mortgages out there. When the market becomes far less liquid, the prices either shoot up or those type of loans will no longer be favored. This could push them to extinction over time.

This seems like a huge shift, and it would be, but it is very possible.

So If Not 30-Year, Then What?

If this happens then a likely spike in interest rates would make the current 30-year fixed mortgage loans far less competitive and thus far less appealing. Some think these massive shifts in interest rates or changes in interest could result in a shift to ARMs.

Without the stability and backing that Freddie & Fannie bring to the table, these don’t become the easy access good deals that homeowners have enjoyed in the past, and it makes them scarier investments.

If this situation was to play out, there’s a good chance that 5/1 ARM or 7/1 ARM loans would become about as attractive an option (or an even better option) than any new 30 year rate that would be made available. These could get even better if investment interest in 30-year fixed rate loans dried up after the changes. Banks won’t keep putting out loans that there’s no investment interest in.

While this would be a huge change, it is worth noting that the 30-year fixed mortgage is rare or a huge minority of home loans in many advanced economies like the UK, Ireland, the Netherlands, Canada, South Korea, and Spain. So other options are viable, even if the transition appears to be a bit rough at first glance.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695 Click here to go to the next article in this series.

Facts About Fixed Rate Mortgages And How They Work

For the average person buying a home is exciting and fun. It’s figuring out how to get it financed that is not as much fun. Housing prices and the rates on mortgages vary overtime but a buyer can rely on a fixed rate mortgage to not fluctuate.

What Are Fixed Rate Mortgages?

This type of mortgage is simply one where the interest rate always stays the same amount over the life of the loan. This means that how much you pay each month and the amount of interest that is applied to it will always be the same. The one exception to this is if your homeowner’s insurance or property tax rates change then it could impact your monthly payments. For the average homeowner, a fixed rate mortgage is the most ideal because it’s stable and predictable.

In most situations, a fixed rate mortgage will have a higher interest rate than an adjustable-rate will initially. But ARMs are only lower initially in most cases and then after a certain period of time such as three, five, or seven years, the interest rate goes up. Once that initial period is up, the rate can fluctuate as can your monthly payments and that fluctuation can take place over the remainder of the loan. There are some limits to the fluctuation as most ARMs do have a cap.

The Most Common Mortgages Available Are Either An Adjustable Rate Mortgage Or A Fixed Rate Mortgage

A typical fixed rate mortgage will come with the option of choosing how long you finance for and this can range from 10 to 30 years. The interest rate itself will always stay the same regardless of how long the mortgage is for. Because this is so much more stable it is the preferred type of mortgage for the average homeowner.

The rate of interest paid on an adjustable rate mortgage will fluctuate overtime during the course of the loan. An ARM has its interest rate based on a margin and this is what determines what you pay in interest any given month. The spread remains the same but what causes the fluctuation is the fact that the index changes.

The loan will be adjusted regularly and those changes are based on the terms of the mortgage. When the interest rates increase the borrower will have to pay more and they will need to put that extra amount in their budget to meet the higher payment. A borrower doesn’t need to make this type of adjustment when they have a fixed rate mortgage because it will always stay the same. The one drawback is that they also won’t get the advantage of having their payments go down if interest rates go down unless they refinance.

The fixed rate mortgage can increase if the borrower places property tax and homeowners insurance in escrow. This is due to the fact that insurance and taxes will sometimes go up. This is not the interest rate fluctuating that causes the increase but only the fact that the cost of insurance and taxes went up.

How Long Does It Take To Repay A Fixed Rate Mortgage?

The term of the mortgage is what determines how many years it will take to repay the loan. The most common fixed rate mortgages are either 15 or 30 years. Here are some of the pros and cons to consider with each of these options.

30 Year Mortgage

The biggest pro when it comes to a 30-year fixed-rate mortgage is the fact that the monthly payments can be considerably lower than they will be with a shorter-term mortgage. The drawback to this option is the fact that over the life of the loan you will pay a lot more interest than you would with a shorter-term mortgage. The interest rate is usually more for this type of mortgage as well.

15 Year Mortgage

The pros of this mortgage include the fact that you will pay less interest because it is a shorter term and the interest rate itself will be lower. The reason why more homeowners don’t take advantage of this choice is the fact that the monthly payments are higher.

For most borrowers, the 30-year fixed-rate mortgage is preferable over the 15-year loan simply because the payments are lower. When you go with a longer-term it usually means you can borrow more money. For some homeowners, it means that they can have an additional monthly cash flow that can be applied to other things including emergency savings, children’s college tuition, and other priorities.

For those who have the extra cash flow, the 15-year mortgage may be the better choice because they’ll pay off their home faster and the interest rate will be lower. Because you’re repaying more of the principal it means your overall monthly payments will be higher and this means you’ll need to make certain it’s something you can afford together with other financial goals you have.

Understanding The Difference In Mortgage Lengths

If Jane is a first-time home buyer and she has a tight budget then the length of time she chooses for the mortgage can determine how much she can borrow. If as an example she feels that she can afford $1,000 a month then she may be able to get a payment close to that but the length of the loan will determine how much she can get. If Jane chooses a 30-year fixed mortgage with an interest rate of 4.5% then she can get a $200,000 house and her payment will be $1,013.

If she chooses a 15-year mortgage then the interest rate might be 4% and this would mean for the same monthly payment she would only be able to get a home that was $137,000. This means that if she goes with a 30-year fixed loan she will be able to borrow an extra $63,000 while maintaining the same monthly payment. Of course in that situation, she would pay more interest.

If Jane decides to borrow $200,000 on a 30-year fixed mortgage at four and a half percent then she will pay $164,813 in interest over those 30 years. If on the other hand, she goes with the 15-year mortgage at 4% then she will pay only $66,288 in interest over the mortgage. That means she will save $98,525.

Compare Rates

There are always a number of options that you’ll want to consider. It’s best that you understand exactly how much you’ll be paying in principal and interest and this can easily be done using a mortgage calculator. Obviously, a lender will be more open to offering a competitive rate and terms to those who have a stronger credit history.

Before making a decision,k let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 717-9695