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### Saturday, May 03, 2014

## The Home Owner's Dilemma

The cost of your house is really determined by two things: your monthly payment and the interest rate your pay. The payment is important because you have to be able to afford a certain amount each month. The interest rate counts because that is what determines your housing costs, over the period of a mortgage loan. The purchase price you see advertised in the newspaper is not what you pay for your house.

The cost of your house is really determined by two things: your monthly payment and the interest rate you pay. The payment is important because you have to be able to afford a certain amount each month. The interest rate counts because that is what determines your housing costs, over the period of a mortgage loan. The purchase price you see advertised in the newspaper is not what you pay for your house.

What your House Really Costs

To examine why this is true, let's use the example of a house for which, we'll assume you paid $120,000. You make a down payment of $20,000 and finance $100,000. In shopping for a loan, you narrow down your choices to two options. One bank wants to lend you the money at 10 percent interest and will give you 30 years to repay it. Another bank will charge only 9 percent interest, but only if you agree to repay the loan over 15 years.

The payments will be much different with each loan. The 30 year loan will cost you $877.58 per month; the 15-year contract will be $1,014. The difference between these two loans is $136.69 per month. That's a lot of money if you're on a fixed income and have been renting for a lot less than either of these monthly amounts. The payments are higher for the 9 percent loan even though the interest rate is lower. That's because the loan is scheduled to be repaid in one-half the time. It has to be amortized, or paid down, at a faster rate than the 30-year loan.

Opting for the right home mortgage broker will make it much easier for you to acquire the right loan. The home loan brokers will take you to a good lender whenever you need one.