Mortgages explained by industry expert

Mortgages explained by industry expert

When we think about our mortgage, the urban myth is that we just pay interest in the beginning and then pay principle near the end. At today’s interest rates, that just isn’t true.

Many of my clients are paying rent in the $1,500 per month range. I thought that this would be the perfect payment to compare…

Many First time home buyers compare the rent payment to the mortgage payment and find that they are almost exactly the same, for the same house.

Did you know; every mortgage payment is comprised of an interest portion, paid to the bank and a principle portion paid to you. The principle portion of the mortgage payment reduces the amount of money that you owe to the bank. This principle portion goes toward and grows the equity that you have in your home. Therefore, the principle goes to you.

At today’s interest rates, the principle portion is almost half of the total mortgage payment.

Let’s compare a rent payment of $1,500 a month to a mortgage payment of $1,500 per month. After five years of making principle and interest mortgage payments of $1,500 each month, you would have gained $8,700 of principle every year.

For context, that’s like renting from your landlord for five years, then having him give you over $45,000 when you move out.

In today’s market, you can’t afford not to own your own home!

Let’s look at some more numbers… (if you want)

If you have a mortgage of $315,000 your mortgage payment is $1,489.09 at 2.99% (current rates at June 15/13) and a 25-year amortization. After 5 years, your principle balance is $269,163. Which means that you will have gained $45,837 in equity. If your home increases in value by just 1%. After 5 years, that would be an additional $16,000 of equity.

Have a question about your specific situation, contact me directly at 403-870-2669 or complete the form on the right. Feel free to include any questions or comments. If you want me to call you, then type your phone number and the best time to reach you in the comments section.

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