Whether you’re buying or selling a home, you’re going to be confronted and perhaps overwhelmed with numbers: interest rates, days on market, loan terms and more. They’re all significant in the transaction, but what do they mean?
This column is not the place for in-depth analysis of real estate math. That would be a tall order. I hope to convey two things: The importance of understanding what the numbers mean and that there is help available to decipher it all.
Many buyers are able to shorten their financial obligation by choosing a 15-year mortgage instead of the 30-year variety. The payments on 15-year mortgages are larger, but not, as it may seem, twice as large. If you can handle the bigger monthly expense, you’ll build equity faster because a greater portion of each payment goes toward principal rather than interest. Additionally, the lower rate and shorter term lessen the overall interest due.
With a longer loan term, you have a higher interest rate and build equity more slowly, but you get the benefit of lower monthly payments and, perhaps, increased buying power. You still have the option to shorten your loan by making additional payments when possible.
Read Danny Frank’s full article in the Houston Chronicle.