This Week’s Featured Loan Program: The 20 Year Loan

This week we are going to talk about a product that allows you to pay off your loan in 2/3 of the time of a standard loan program and at a lower interest rate.  The 20 year Conventional Loan Program, available today at a rate of 4.25%. Read below for the costs and advantages of this program.

In order to afford to do this type of a shorter term loan, you have to have a little more cash each month to put into your payments, as you are obviously accellerating the payment schedule by 10 years.  The difference in monthly payment on a $200,000 home would be about $240 a month (or about $120/mo per $100,000 in price) between a 30 year fixed loan and a 20 year loan.* 

What this gains you, though, is a significantly less amount of interest paid over the life of the loan, which becomes money in your pocket eventually if you are one of the rare people that can stay the course and not continually pull money out of your home.  On a standard 30 year product you would pay about $160,000 in interest payments over the life of that loan.  Meanwhile, on a 20 year loan, that amount drops to just over $97,000 in interest paid.  Thats a difference of $63,000 in how much you actually spend on your home!  Keep in mind, either way you still own the same $200,000 home (plus any appreciation) at the end of that time too!

If you would like more information on what you can do to either live more comfortably in the home that you have, or to find out about what you can do to become a homeowner, comment to this article and I will be sure to get back with you!

*All figures were created using a $200,000 loan value.  The 20 year figures used the 4.25% rate, and the 30 year figures were created using 4.375% rate.  This is a conventional product and requires a 20% downpayment and good credit scores to get the best quoted rate.  No taxes or insurance were factored into the payment as they would be assumed to be the same for the house in the example regardless of the term length of the loan.