15 Year Mortgages On Sale

You may be one of the many people rush around on Black Friday every year to take advantage of specials on some gifts and electronics. While that can save you a few dollars, if you’re a homeowner, or buying a home, you should be aware of one of the great bargains available today. That is the current interest rate on 15-year fixed mortgages.

Understanding the Value of Historically Low Rates

Mortgage lenders traditionally price the rates for 15-year conventional mortgages at around .5% below the rate for 30-year loans, as they present a lower risk. However, we are now seeing a situation today where the shorter-period loan has an unusually high differential of .76%

Anyone who understands the time value of money will appreciate just how much difference such a seemingly small amount in your interest rate makes over the life of a mortgage. For example, if you take out a $200,000 conventional fixed mortgage today for 30 years at the prevailing 3.75%, you will pay $926 a month in principle and interest.

However, the same $200,000 on a 15-year fixed mortgage is available for only 2.99%. This would mean you have a monthly principle and interest payment of $1,380. That small increase in your payment has very significant meaning to you as a homeowner. Instead of paying nearly double for your home over the 30 years, or $133,433 in interest, you only pay a total of $48,436 in interest on the 15-year home loan.

Doing the Numbers

If you’re a savvy shopper and always look for the best discounts, these numbers are worth understanding fully. For example, the $85,000 you save in real interest costs means you are effectively saving more than $472 a month if you spread that savings over the 15 year period. That alone is more than the increased monthly payment, so you can look at it as a form of tax-advantaged savings.

However, the advantages go far beyond this significant amount of savings on interest paid. A major factor is the ability to totally pay off your home 15 years early. Stop and consider what your retirement fund would look like if you continued to make that mortgage payment to yourself over the next 15 years. At even a conservative rate of return of 6%, that would accumulate to more than $400,000, twice the original amount of your mortgage!

Plus, your home is paid off, meaning that instead of making a payment for 30 years to pay off your $200,000 mortgage (and giving your banker $133,000), you end up with a debt-free home (at its increased value) plus $400,000 in your retirement account.

In just about anyone’s book, that is called a big win-win scenario. Even if you’re currently paying on a current longer-term mortgage, we can help you evaluate the economics of refinancing to take advantage of these unprecedented rates. Of course, rates change daily, and, like your favorite shopping time, it’s important to take advantage of these bargains while they’re still available.

Call Anthony VanDyke today and we’ll respond promptly to any of your questions. You can reach us at 801-206-4343 and we can help you take advantage of a great rate on your own 15-year mortgage. Don’t miss out on what this will mean to your financial status today and in the future.