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If a mortgage company offers you a 30-year fixed interest rate of 5.50%, when do you begin paying 5.50% interest on the money that you borrow? Your answer to the above question would probably be, "As soon as I make my first payment." Unfortunately, you would be incorrect. But this is a common misconception. In fact, the one and only time that one would pay 5.50% on a 30-year, fixed rate mortgage at that rate would be in month 360. That is the only time in which your effective interest rate - the true cost of money over a fixed period of time - is equal to the interest rate on your Note. So, what exactly does this mean? Not all that much if you are planning on making 360 monthly mortgage payments over the next 30 years to pay off your home loan. If, however, you consider that the average American holds his or her home loan for only 5 years due to either refinance or sale, this information is quite powerful. Let's assume, for a moment, that you are like tens of millions of other American homeowners and will hold your mortgage for 5 years. Let's also assume that you have a 30-year, fixed-rate mortgage at 5.50% in the amount of $400,000. Loan Amount = $400,000 Interest Rate = 5.50% Monthly Payment of Principal
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First Rockland Financial Domus Mortgage Services, Inc. www.firstrockland.com www.domusmortgage.com
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