Secret #3 To save thousands when buying a home

Understand The Basics Of Home Financing

Your ability to afford a home will be related to a number of items. They are:

1. The PRICE of the home.
2. Your DOWN PAYMENT on your home, and thus the amount financed.
3. The INTEREST RATE
4. The TERM of your loan: 10 year, 15 year, 30 year.
5. The overall TYPE of your loan: Most common is fixed vs. variable rates, but there are
typically numerous of loan programs to choose from.

And just in case you were looking for a specific “rule of thumb” for financing your home, you should know that…There Are NO reliable General Rules Of Thumb About Financing Your Home. Each case is different, and your personal financial circumstances will have an impact on how much home you can afford.

However, you MUST understand the relationship and impact interest rates, term of loan, and type of loan can have on your overall financial picture.

How Interest Rate and Term can make or COST you thousands.

Mortgage lenders toss around interest rate numbers as if it doesn't matter.

They DO! And to illustrate the impact interest rates can have on your overall financial picture, The table below showes the interest you pay over the term of a 30-year, $150,000 loan at 8%, 7% and 6%.

Your banker might tell you his “slightly higher rate” is only a matter of $103 a month in payment. But YOU should know better! Take a look at the table below…

Loan Amount $150,000 $150,000 $150,000
Interest Rate 8% 7% 6%
Monthly Payment $1,101 $998 $899
Total Interest Paid $246,233 $209,263 $173,757
Savings -- $36,970 $72,476

That’s money taken out of your pocket if you don’t look for good rates! And if you think interest rate has an impact on your overall financial picture, take a look at what modifying the TERM of your loan can do…Here’s another example of a $150,000 loan at 7% interest. But this time, we examine the total interest paid when you select a 30 year vs. a 15 year vs. a 10 year amortization…

Term 30 Year 15 Year 10 Year
Interest Rate 7% 7% 7%
Monthly Payment $998 $1,348 $1,742
Total Interest Paid $209,280 $92,640 $59,040
Savings -- $116,640 $150,240

The “bottom line?”
Estimate the maximum amount of payment you can afford, and adjust TERM and INTEREST RATE of your loan to minimize the amount of total interest you’ll pay.

But then your banker cuts in and says, “but the interest you pay is Tax Deductible…” And you should know this: If you’re in the 28% tax bracket, for every dollar in interest you pay, you only save 28 cents. Don’t go spending a dollar to save 28 cents if you can help it!