The Difference in 15 and 30 Year Mortgages

If you are ready to apply for your Florida mortgage, there are many things you should take into consideration before signing the dotted line. A mortgage is a very big step and a huge responsibility. This being said, you must make sure that you speak with a professional on the subject and do what is best for your financial situation. Since there are so many areas to focus on and take into consideration when applying for an Orlando mortgage, we will take it step by step. First, let's talk about the difference in a 15 year mortgage and a 30 year mortgage.

So, let's talk about your financial situation first. Normally, a 30 year mortgage is going to be a smaller payment per month, but you will have a higher interest rate and pay substantially more interest over the life of the loan. A 15 year mortgage may have a higher monthly payment, but it has a lower interest rate and because the loan is paid off much quicker the total interest cost is much less.

Let's look at some numbers as an example. Say you find a home or property for $200,000 and apply for a 30 year fixed mortgage. You have a little saved up and put down 20% of the sales price when you sign. While interest rates change constantly we will use 4.75% for this example. You borrow $160,000 and this makes your monthly payment $834.64 a month. Not a bad monthly payment, but you end up paying a total of $140,470.40 in interest over the course of those 30 years. You can calculate this by taking the monthly payment times 360 and then subtracting the original loan amount:

($834.64 x 360 = total payments of $300,470.40 - $160,000 = $140,470.40)

This means you are paying $340,470 for a $200,000 property!

Now, if you apply for a Florida mortgage in Orlando that is a 15 year fixed rate mortgage for the same amount and the same money down, your interest rate will around .75% lower (4% instead of 4.75%). This difference changes slightly but .75% is a estimation. Now you are only paying over 15 years, instead of 30, so your monthly payment will go up. With a rate of 4%, your new monthly payment is $1,183.50.

After your 15 years are up, you would have paid a total of $53,030.12 in interest instead of $140,470.40. With a 15 year Orlando mortgage, you are paying $253,030 for a $200,000 property.

Surprised at the outcome? Yes, you end up saving almost 50% of the cost of the home!

So, which would be best for you? Well, do you have the monthly cash flow to pay that extra money each month? If so, then you could go with either mortgage term of your choice.

One of our mortgage professionals can help you analyze your personal financial situation and make a good decision.

So, when you go to make your final decision on which type of Orlando mortgage to choose, remember to think long term!