Total Cost of a Mortgage

Before signing off on that loan for your next home make sure you do your homework. It could save you $50,000, $100,000 or even more. There are many different types of loans and you should consider your options with a specialist. A Weichert Myrtle Beach realtor can provide exceptional advice or refer you to a mortgage loan specialist through their vast network of corporate partners.

Let’s say that you want to purchase a $300,000 North Myrtle Beach Condo. You have $60,000 for a down payment, therefore need $240,000. For simplicity of this example there are no loan fees, insurances, or points. (But remember that they add to the total cost of the loan in the real world) You get a fixed rate loan at today’s rate of 6.375%. A fixed rate loan remains the same for the life of the loan versus an adjustable rate loan which fluctuates with the market. You can imagine the pros and cons of each.

You are tempted to get a 30 year loan for about $1,497.29 a month versus the $2,074.21 a month for a 15 year loan. With a simple amortized loan like these a large percentage of your monthly payments goes towards interest in the beginning. For the first month of your 15 year loan $1,275.00 of your $2,074.21 goes to interest while $799.21 goes towards the principle. At the 60th month, end of year 5, $981.70 goes towards interest and $1,092.51 towards principle. You have half of the loan paid in year 10. After 15 years the total cost of the loan, including the down payment, amounts to $433,355.05.

For the first month of your 30 year loan $1,275.00 of your $1,497.29 payment goes towards interest while $222.29 goes to principle. At the 228th month, end of year 19, $757.23 goes towards interest and $740.06 to principle. You have half the principle paid in year 22. At the end of 30 years your total mortgage cost is $599,022.06. That’s a difference of about $160,000.

This is just a guide to help you realize the importance of evaluating the real cost of mortgage loans. This example did not take into consideration other investments you may have, future inflation, refinancing, personal matters, and the criteria listed above.