Take another look at short-term loans.While the 30-year fixed interest rate loan has gained in popularity, partially in response to the credit crunch caused by the subprime mortgage crisis, there are additional mortgage strategies that can be discussed with your professional mortgage broker to speed equity growth while maintaining a fixed interest rate.
One of these is the 20-year loan verses the 30-year loan. A 20-year loan may only cost a few hundred dollars more in monthly mortgage payments, but if you are able to qualify, the rate and amount of the equity increase can more than offset the additional cost. With a long-term loan the disposition of the principle is delayed.
In the initial years of making payments on a mortgage loan the payment is directed toward the payment of interest and a smaller amount to paying down the principle. With a mortgage loan of less than 30-years, the principle is paid down faster, saving thousands of dollars in interest costs.
The option that some consumers choose is to avoid higher payments and stay with a 30-year mortgage, making an occasional additional payment directed toward the principle. This strategy requires a systematic approach to be completely successful and unless such a strategy is implemented any savings realized will be reduced.
Another consideration to discuss with your mortgage broker is the ability to obtain favorable loan terms that meet your specific financial needs. A 30-year loan and a 20-year loan need not have the same interest rate. If a lender is not giving enough of a spread between the 30-year and the 20-year options, work with your mortgage broker to find a more suitable lender. The thinking here is that if you have qualified for the 20-year mortgage with higher payments you are less of a risk for the lender.
Clearly, by taking time to explore your mortgage options before making a final decision you can get a good loan and save both time and money.
Premiere Mortgage has offices on Maui and Kaua‘i and provides a wide range of services to the real estate community. Tricia Morris may be reached on Maui, in Kihei, at 874-8800, Wailea, at 891-8900, West Maui at 665-8800, on Kaua‘i at (808) 822-2300, or toll-free at (800) 813-7711.