Monday, July 06, 2009

Finance tip by Frank

15 Year Mortgages
The Positives and the Negatives
Let’s pay this mortgage off quickly, let’s get a 15 year mortgage. We would all love to be able to say that but considering the difference, is it really worth it? We will study this example:
$300,000.00 Mortgage Amount
15 Year Payment at 4.75% = $2,333.50 for 180 months = $420,030.00
30 Year Payment at 5.25% = $1,656.61 for 360 months = $596,379.60
WOW! A monthly savings of $676.89 & total savings of= $176,349.60
You would think the 15 year mortgage is a no-brainer, however most financial advisers recommend the 30 year for various reasons. The main reason is due to emergency events we have no control over and need those funds to cover them such as loss of job or medical expenses. Here is what I advise my customers and it is so simple anyone can do it.
On a mortgage with no prepayment penalty you are allowed to make principle payments without any penalty. Here is the secret formula. Obtain a 30 year mortgage but make your 15 year payment at the same rate. The lender cannot say no and you have all the flexibility you need should something unexpected arise. The lender applies the difference to principle thus reducing the interest on the loan and the time for it to be paid off.
If income is good, make the larger payment always knowing you can go to the lower payment anytime you wish without any penalties. It feels real good to have that option that you would not have with a 15 year mortgage. Sure the difference in the rate would give you a payment of $2, 411.63 on the 15 year but it is so good to know I can pay $1,656.61 if needed. For more creative ideas on financing, please feel free to reach me at
If you are looking to buy or sell Real Estate in the Keys please contact me at or 305-393-0923

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