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Lenders Offer Special Low Rate for 15 Year Term - 2009-08-09 |
We’ve all heard about the PITI formula: Principal, interest, taxes and insurance. These four items make up the monthly payment that most homeowners send in to their lender each month.
Principal repayment is the gradual reduction in the loan balance over the term of the loan. And interest can be thought of as the rent you pay for borrowing the money you used to purchase your house.
Because home loans are calculated with simple interest, the amount of interest charged declines each month as the principal balance of the loan is paid down.
Taxes are paid to the county or municipality collecting them, and lenders require that we maintain Insurance coverage on the house to protect them (and us) against loss due to fire or other casualty.
Of these four elements, the interest we spend over the life of the loan is typically the greatest expenditure we face, so whenever a borrower has an opportunity to significantly reduce that expense, it’s worth considering.
That opportunity may be at hand.
Recent comments by Federal Reserve Chairman Ben Bernanke indicated that the central bank believes inflation will not be a concern for some time. That was good news for mortgage markets, causing rates to drop slightly.
But here’s the best news for borrowers: for the first time in a long time, the differential between 30 and 15 year terms has become significant, rewarding the shorter term borrower with a rate of only 4.75 percent. In contrast, the typical borrower who chooses a similar loan with a 30 year term will have to pay a rate of 5.375 percent.
Both of these rates are for conforming fixed rate loans of $417,000 or less, and both these rates are excellent when compared with predominant rates over the past thirty-some years. But anytime you have the opportunity to lock down a home loan rate of 15 years at any rate under 5 percent, it’s a true bargain.
Here’s why. On a loan of $100,000 under the 30 year rate, the monthly payment of principal and interest is much lower, at about $560 per month, but only about $112 goes toward reducing the loan balance, at least initially.
In contrast, the same loan amount with a 15 year term carries a hefty monthly payment of almost $778, but a whopping $382 of that amount is applied directly against principal in the first payment, and the amount goes up from there over the life of the loan.
My rule of thumb is to always seek to lock in a low rate for as long as possible - Clark Howard once choked when I told him I would take a 100 year fixed rate loan if I could find one - but when rates for 15 year loans get below 5 percent, well, that’s tempting for everyone.
Questions or comments?
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"EPA CERTIFIED RENOVATOR" TRAINING
Do You Work with Real Estate? You Must Be LEAD SAFE CERTIFIED as of April 22nd.
To all owners, realtors, investors, property managers, contractors, electricians, plumbers and painters. Do you ever engage in any level of renovation? If so, read this:
Any renovator, from owners to contractors, from plumbers to electricians to painters, who disturbs lead paint while working in a pre-1978 home, school or day care center, now must be Lead-Safe Certified. If you’re not, you can face tens of thousands of dollars in fines. Plus, you put the health of yourself, your workers and your customers at risk, which could result in lawsuits. One simple 8 hour class certifies you for five years. It’s that easy.
Since April 22, 2010, there are new Federal rules regarding how you perform any work that disturbs lead-based paint in homes, child-care facilities and schools built before 1978. You now must be EPA certified and follow specific work practices to prevent lead contamination.
Failure to follow the new rules can result in federal fines of up to $32,500 per day or up to 5 years in federal prison, or both. Don’t take a chance - it’s not worth it.
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Don’t wait - register now! Click on “Seminars” and choose your day!
- Friday, July 30th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 06th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 13th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 20th at Suburban Plaza, 2643 North Decatur Road
and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 27th at Suburban Plaza, 2643 North Decatur Road
and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
Total Course Cost: $295, includes exam and EPA-HUD 400 page manual
Space is limited to 20 participants.
Training services provided by Seagull Environmental Management Co, Inc.
Courses are approved for purposed of certification under Section 402 of TSCA for the Certified Renovator.
This course has been approved by the Georgia Real Estate Commission for 7 hours of Real Estate Continuing Education
For more information, call toll-free 888-373-0029
Click above on the "Seminars" button to register
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John Adams Presents
“The MetroVestAtlanta.com REO Bus Tour”
Get on the bus for a tour of South DeKalb County’s “Real Estate Owned”
homes. Each house you visit will be available that day for purchase at
a giveaway price, regardless of current condition. Financing is
available!
Throughout the day, we will hear from mortgage providers, people in the
construction business and property managers all discussing today’s
situation with Bank Owned REO properties.
Who Should Attend: Investors, Realtors, Lenders, Prospective Buyers, and
anyone who might want to buy a super-bargain house and either do the
rehab themselves or have all the work performed by the pros.
You will see abandoned dumps and finished products, and everything
in between. And Snap will be there to answer all your questions and
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Saturday, August 21st, 9:30 AM to 4:00 PM
Your $49 fee includes the bus tour and lunch. You must make reservations. No walk-ups.
There is limited seating and the seats are filling fast. ACT NOW before you miss the bus.
We will be meeting at Suburban Plaza, 2643 N. Decatur Road and Church Street, Lower Level, Decatur 30033 (beneath Hancock Fabrics, in the arcade.)
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