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Save on Hill Country Homes with 15-Year versus 30-Year Loans

Posted in: Mortgage News/Sources
By SAGE - Premium Texas Real Estate
Aug 27, 2013 - 10:15:29 PM

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An increasing number of Hill Country homebuyers and Gillespie County property owners today are choosing the 15-Year fixed-rate mortgage to buy or refinance Texas real estate.  The 15-Year product offers great savings to buyers of Fredericksburg TX homes and borrowers who are refinancing Texas Hill Country real estate.  However, payments can be 50 percent higher with the 15-Year versus the 30-Year loan product.

Advantages of the 15-Year option are driving its popularity.  LendingTree.com tracks nationwide trends.  For refinancing, they reported a 29 percent increase in 15-Year fixed-rate loan applications in August 2011 compared to August 2010.  This is the opportunity to own a home in half of the time that it takes with a 30-Year product. Just imagine having no more house payments after 15 years!

The 15-Year type of loan builds equity more quickly, and today's borrowers are extremely interested in building equity.

The 15-Year fixed-rate loan also saves significantly in interest payments.  Most of the time, interest rates are lower with the 15-Year product.  Typically they run 0.5 to 1 percent lower.  The average rate for the week ending September 15, 2011 was 3.30 percent for the 15-Year fixed-rate loan.

Eva Mitchell of Contra Costa Times Newspaper gives an example that compares the two products when used to refinance a $330,000 loan that originated in 2006.  After the borrower takes out at 30-Year fixed rate mortgage in 2006 with a 5.25 percent interest rate, the balance today is $300,000.

Option A:  The balance is refinanced into a 15-Year fixed-rate mortgage at 3.5 percent today.  The monthly payments are $2,144.

Option B:  The balance is refinanced into a 30-Year fixed-rate mortgage at 4.25 percent today.  The monthly payment is $1,475.  

The monthly payment for Option A (the 15-Year product) is $669 more than the payment for Option B (the 30-Year product).  Over the life of the loan, the borrower taking the 15-Year loan pays $145,000 less in interest than he does with the 30-Year loan.

This tremendous savings is available in 2011 when interest rates are extremely low and the Fed says they will remain low for another year.Keep in mind that when interest rates begin to go up again, the interest savings will increase dramatically.  Let's say interest rates climb to 8 percent or 12 percent.  The savings could run into the hundreds of thousands of dollars or millions, depending on the property and loan amount.

For expert guidance in your personal search for the ultimate piece of the Hill Country, please call Dale E. Cook, MBA and owner of SAGE - Premium Texas Real Estate at (830) 992-0056.  


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Dale E. Cook, MBA, Broker/Owner

Sage - Premium Texas Real Estate
405 N. Llano St.
Fredericksburg, TX 78624

830-997-1035 office
830-992-0056 cell

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