If you are considering purchasing a home or refinancing your existing home you should consider the terms of your mortgage loan. What would seem like a small difference in interest rates can make a large difference in the long run.

A low interest rate can make a lot of difference in your monthly payment amount and the difference can amass to a large amount of money over a 30 year span of time. For interest, if you take out a 30 year fixed mortgage for $100,000 at an interest rate of 8% your monthly mortgage payment will be $734 a month, not including your property taxes and home owner’s insurance premiums. If you take the same 30 year fixed mortgage for $100,000 at an interest rate of 6% your monthly payment, not including property taxes and home owner’s insurance, will only be $600. You save $134 a month for 30 years which is 360 months. This makes your total savings a whopping $48,240, not including interest you could make off of this money if you save it or invest it which could make it amount to over $100,000 over the course of 30 years.

This is why it is so important to get the best interest rate and terms you can on your mortgage loan. For instance, it would make more sense to pay some points on your mortgage to get a better interest rate. Take the aforementioned example and consider if the mortgage company is offering you either the 8% mortgage with no points or the 6% mortgage with 6 points. Each point equals 1% of the loan, so for a $100,000 loan that would equal $1,000 per point. That means that you will have to pay $6,000 in points, but you will save $48,240 over the long run by having the lower interest rate. This is clearly the better deal. Many people see the $6,000 up front, which can be financed into your mortgage by the way, and compare that to the $0 up front of the higher interest rate loan and choose the 8% loan over the 6% loan. Don’t be deceived or scared off by points if they lead to a huge savings in the long run.

For more information on interest rates and points go to Mortgage Loan Place.