Taking a mortgage has long been considered as one of the most clever financial decisions a buyer can ever make in today’s economic condition. Unfortunately however, many home buyers are still holding the belief that paying cash must be the preferred method as it gives you more benefits – which is far from the truth when it comes to mortgage. The mortgage interest rates have been at its all time low for the last couple of years, why not taking the opportunity and use it to your advantage?
In addition, taking today’s economic condition into consideration, one is strongly advised to take precedence over emergency saving and retirement saving when it comes to financial decisions. Even if you own the financial capability to purchase a home outright, taking a mortgage does not only help you build a considerable amount of savings for your future, but also helps you to maximize returns as well as maintain your liquidity.
There are a few types of mortgage offered in the market depending on the length of loan given, the most popular are the 20 year fixed and 30 year fixed – however the 20 year mortgage has long been the most preferred mortgage for refinancing and for the fact that it offers lower total interest to be paid which are incredibly beneficial. 20 year fixed mortgage rates today may differ from one lender to another depending on the location, but here we are going to take the conventional fixed rate mortgage from the U.S. Bank. U.S. Bank offers four conventional fixed rate mortgage options namely the 30 year fixed, 20 year fixed, 15 year fixed, and 10 year fixed. However, as it has already been stated, we are going to focus on its 20 yr mortgage rates. Offering 20 year fixed (conforming) mortgage with 4.125% interest rate and APR of 4.225% which can roughly be translated to an example as follows:
Assuming you are taking a $150,000 loan that will be paid off in 240 months at the offered 20 year mortgage interest rates of4.125% interest rate, your monthly mortgage payment would be at around $918.89 with an annual percentage rate (APR) of 4.125% as opposed to the previously mentioned 4.225%.
Since mortgage rate is incredibly low at the time, homeowners who are already on a 30 year mortgage term may benefit from refinancing to a shorter mortgage. In order to find out how the 20 year refinance mortgage ratesmay affect and benefit homeowners looking to refinance after about five years into their 30-year mortgage.
With the same assumption of taking a $150,000 – five years into their 30 year mortgage basically leaves homeowners with a remaining $135,943 but if a prompt action is taken and homeowners refinance to 20 year fixed mortgage rates today, it will leave them with about $122,291 of mortgage to be paid. A huge chunk of $13,000 is taken out as 20 year mortgage, although it has a slightly higher monthly payment than a 30 year mortgage plan, has a lower total interest.