The most popular loan product is the fully amortizing 30-year fixed rate loan. It is payable in equal monthly installments of principal and interest over 360 months and at the end of the loan term it will have been repaid in full. There are other loan term options available to you.
Most lenders also offer 15-year fixed rate loans. Your monthly mortgage payment will be higher with a 15-year fixed rate loan because the amortization period is shorter but you will repay the loan twice as fast, the interest rate will be lower and in the long run you will save a lot of money on interest. While the monthly mortgage payment is higher with a 15-year fixed rate loan, the total cost of the loan is much lower.
Many lenders also offer 40-year fixed rate loans. Your monthly mortgage payment will be lower with a 40-year fixed rate loan because the amortization period is longer but it will take longer to repay the loan, the interest rate will be higher and in the long run you will pay much more in interest. While the monthly mortgage payment is lower with a 40-year fixed rate loan, the total cost of the loan will be significantly higher.
| 15-year Fixed Rate Loan | 30-year Fixed Rate Loan | 40-year Fixed Rate Loan | |
| Loan Amount | $400,000 | $400,000 | $400,000 |
| LTV | 95% | 95% | 95% |
| Interest Rate | 3.375% | 4.125% | 4.750% |
| Monthly Principal + Interest payment | $2,835.04 | $1,938.60 | $1,863.03 |
| Interest Paid After 10 years | $96,527.38 | $149,092.76 | $180,707.64 |
| Interest Paid Over the Life of the Loan | $110,307.10 | $297,895.61 | $494,255.08 |
This comparison chart is not intended to account for all financial differences among the three loan products but is illustrative of some key differences. The chart, for example, does not account for PMI. Your total PMI cost on a 15-year fixed rate loan with an initial LTV of 95% would be less than with a 30-year fixed rate loan and much less than with a 40-year fixed rate loan because the shorter the amortization term the sooner will the LTV drop below 80% at which time you will no longer have to pay PMI. The interest rates in the chart above are for illustration purposes only. Contact us to find out what rates are available today.
