Mortgages

Let’s blog mortgages……I am expecting that this will be a technical blog with plenty of numbers and references to stats.  I don’t think this going to be on the entertaining side but I promise that it will be informative. Here we go….

Comparing a 30 year fixed, a 30 year fixed paying extra, and a 15 year fixed.  Historically the 30 year fixed is approximately .75 points higher than a 15 year fixed. For  this example we use the 30 year at 4.5% and the 15 year at 4.0%. 

	30yr Fixed	30yr w/extra $349	15yr Fixed
Monthly Payment	$760	$1109	$1109
Loan amount	$150,000	$150,000	$150,000
Interest paid	$123,612	$59,674	$49,714
Total	$273,612	$209,674	$199,719

Have you finished the math yet? The number that has our interest is the $73,000 you would save versus a 30yr fixed.  The reason I put the extra payment plan in there is because it is common for most people to think or be sold on the approach that they could just pay extra on the mortgage each month.  As you can see that argument has you coming up short $10,000 and not pictured is that it would take you about 16.5 years to complete. 

To those 1^st time homebuyers, when you budget for a house remember it not to exceed 30% of your take home pay and that by using 15yr mortgage it will ultimately save you THOUSANDS of dollars.

So what are the objections to a 15yr fixed? Would you be "upside down" in your mortgage if you used a 15yr fixed?

BUDGET!!!

Image via Wikipedia

You really want to save money?  Then start with a budget! So many times we like to over think things, when it is really the simple idea or plan that works the best.  Almost 70% of Americans are living paycheck to paycheck and nearly the same percentage does not have a budget……could there be a correlation between the two?  I think Zig Ziglar says it best “Aim at nothing and you will hit it every time”

A budget is nothing more than a spending plan.  Spending money on paper with a purpose will allow you to save a ridiculous amount of money over any period of time.  Not having a budget is like not have a goal or destination in mind.  How can you possibly get to where you are going if you don’t know where you are going?????