For decades, when home buyers were discussing the terms of their mortgage, it was generally understood that it would be paid off in 30 years. But a couple of decades ago, buyers started hearing about the option of a 15-year mortgage. The allure of the shorter term mortgage is obvious: Shorter terms means you pay less interest.
It isn’t the deal it once was
Using the mortgage calculator at Realtor.com, we can see just how much your payment will be. With a buying price of $200,000 and a 20% ($40,000) down payment, your payment will be $1,086 on a 15-year mortgage at 2.75% APR. On a 30-year mortgage for the same house, same down payment, with 3.5% APR, your payment will be $718. That’s a difference of $368.
The drop in interest rates isn’t what it used to be. In the 1980s, there was a discernible difference in…
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