Your getting a mortgage yay! Congrats good for you. you finally found your dream house. Now you want to finalize the deal and you are starting to look around for a mortgage. You already weighed the pros and cons of getting a Fixed vs an ARM, as well as a conventional vs a FHA or VA. But there is one question still on your mind. Chase bank is offering you a rate of 4.5% and Sebonic Financial is offering you 4.039% which bank should you sign with?
What is the different in PITI payments between the two banks?
Lets make an example: (Use a Mortgage Calculator to run your numbers)
Loan of $300,000
20% Down payment
$1,500 Property Tax
$500 Property Insurance
At Chase’s rate of 4.5% your monthly payments will equal $1,382.71, this will equate to a whooping $497,776.11 once your term is over. Sebonic Financial on the other hand will only have a monthly payment of $1,317.87 (a difference of $64.84 a month) and a full term payment of $474,431.79. Over the course of 30 years your additional payments would equal $23,342.40 a huge difference.
Now, you may still want to choose a bank you are comfortable with over the bank that has horrible reviews online, but that is beyond the scope of this article. Today we were discussing strictly the difference of 0.41% that can amount to a $20,000 or more in savings.
The difference between a percentage point in a mortgage can be huge. A lower late can save you literally thousands of dollars. Shop around for the best rate before applying for a mortgage.
How do interests rates work?
The rates are compounded daily or monthly depending on the bank. The more often the worst (or better) it can be for you. A CD that is compounded daily will add the interest to be included into your profits, a debt will do the opposite. Read this great article for more information.
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A lower interest rate in a mortgage can amount to thousands of dollars in savings.