When it comes to buying a house, one of the important things to prepare is a pre-approved mortgage. However, did you know that there is a way to save as much as $100,000 on your total mortgage?
A simple switching of mortgage term is said to do the trick. According to Realty Times, 86 percent of people opted for 30-year loans in Feb. 2015.
While a 30-year loan is a much more viable option for most because of its lower monthly payments, homeowners should realize that they will save a lot more in the long run if they opted for a 15-year term instead.
According to Investopedia, the benefits of choosing a 15-year loan show a much higher savings in the long run. Aside from having a lower interest than that of the 30-year term, you are also paying 2.2 times more when you go for the longer term.
"When the interest rate is 4 percent, a borrower actually pays 2.2 times more interest to borrow the same amount of principal over 30 years compared to a 15-year loan," the publication noted.
The publication further reported that banks often require lower interest rates for a 15-year loan because this is less risky for them. However, a higher monthly payment can be very difficult for some.
This kind of term, therefore, would best suit those individuals who have higher paying jobs or those who do not have any kids to support in school or those who are about to retire.
Realty Today also previously reported on the use of a shared equity mortgage, especially for those who are just looking to start their own family and do not have enough resources to buy their own home.
A shared equity mortgage will let you get your dream house with the help of someone who has good credit scores and enough savings such as your family or close friends.