43°F
weather icon Mostly Cloudy
Las Vegas, NV
Resale News

Fixed-rate mortgage: Just the basics

By HOLDEN LEWIS BANKRATE.COM
December 25, 2016 - 3:23 am
 

The most common type of home loan is the fixed-rate mortgage. The interest rate remains the same for the life of the loan, so the principal and interest remain the same, too.

Fixed-rate mortgages

• Main benefit: Monthly payments don’t change. (Unless property taxes, insurance premiums or homeowners or condo association fees change vary.)

• Main drawback: Generally, the interest rate on an adjustable-rate mortgage is lower. (But adjustable rates can go up over time.)

A mortgage’s term is the number of years you have to pay it. You have two main choices: a 30-year term or a 15-year term.

30-year vs. 15-year mortgages

30-year loan:

• Pro: For a given loan amount, the monthly payments are lower.

• Cons: You pay more total interest over the life of the loan. The interest rate is higher.

15-year loan:

• Pros: You pay less total interest over the life of the loan. The interest rate is lower.

• Con: For a given loan amount, the monthly payments are higher.

The 30-year fixed-rate mortgage is more popular than the 15-year because it provides a lower monthly payment for the same loan amount. This means that if you know how much you can afford every month, you can borrow more money — and get a more expensive home — with a 30-year fixed.

Similar payments, different amounts

Gene can afford about $1,000 a month in principal and interest. Gene can choose between a 30-year fixed with an interest rate of 4.5 percent and a 15-year fixed at 4 percent.

• 30-year fixed at 4.5 percent: $1,013 monthly principal and interest for a $200,000 loan.

• 15-year fixed at 4 percent: $1,013 monthly principal and interest for a $137,000 loan.

For the same monthly payment, Gene can borrow $63,000 more with a 30-year fixed.

But that’s not the entire story. For the same loan amount, you pay more interest with a 30-year fixed.

Same amounts, different interest

For a $200,000 mortgage:

• 30-year fixed at 4.5 percent: $164,813 total interest for the life of the loan.

• 15-year fixed at 4 percent: $66,288 total interest for the life of the loan, or $98,525 less.

MOST READ
Don't miss the big stories. Like us on Facebook.
THE LATEST
Maryann Dingman
From headlines to households: Why national data misleads local sellers
By Maryann Dingman Special to RJRealEstate.Vegas

In today’s fast-paced digital world, national housing headlines dominate our newsfeeds. Every week seems to bring a new story: “Home prices are plunging!” or “The market is cooling across the country!” But for homeowners, these broad strokes rarely reflect the reality of what’s happening right here in our neighborhoods.

Brandon Roberts
Nevada Realtors president looks at 2025 legal strides, challenges
By Brandon Roberts Special to RJRealEstate.Vegas

In the month of “gratitude,” and as my two-year term as president of Nevada Realtors ends, I’m filled with deep gratitude. I look back, proud of the work we’ve done for our members, our industry partners, our legislators and the Nevadans we serve every day.

The PENTA Building Group is the presenting sponsor of Roseman University’s Hero Scholar Class ...
REAL ESTATE BRIEFS: DEC. 13
Provided Content

The PENTA Building Group has signed on as the presenting sponsor of Roseman University’s newly rebranded Hero Scholar Classic, launching a four-year commitment to helping expand scholarship opportunities for future health care professionals. This year’s tournament, held on Nov. 3 at Red Rock Country Club, brought remarkable community support, with 135 participants, 18 volunteers and 96 sponsors, raising $216,680.

The PENTA Building Group is the presenting sponsor of Roseman University’s Hero Scholar Class ...
REAL ESTATE BRIEFS: DEC. 13
Provided Content

The PENTA Building Group has signed on as the presenting sponsor of Roseman University’s newly rebranded Hero Scholar Classic, launching a four-year commitment to helping expand scholarship opportunities for future health care professionals. This year’s tournament, held on Nov. 3 at Red Rock Country Club, brought remarkable community support, with 135 participants, 18 volunteers and 96 sponsors, raising $216,680.

the Nevada State Apartment Association recently collected and donated over 11 tons of food to t ...
REAL ESTATE BRIEFS
Provided Content

Berkshire Hathaway HomeServices Nevada Properties is spreading holiday cheer with its annual Toy Drive in support of the Firefighters of Southern Nevada Burn Foundation.

Jim Reilly
REAL ESTATE BRIEFS
Provided Content

The Four Seasons Private Residences announced it has sold 75 percent of their high-rise Henderson condos and has secured nearly $700 million in construction financing for the project.

MORE STORIES