Question:

How to compare mortgage interest cost of different loan options?

Answer:

Mortgage interest cost is best comparable when different loan options for the same amount are considered. For example, if you want to compare interest cost of a fixed rate mortgage of $250,000 for 15 or 30 years, you have to consider payment options (normal or accelerated amortization), mortgage interest tax deductibility, your tax bracket and marital status.

Mortgage Interest Cost
$250,000 at 6.5% for 30 years $250,000 at 6.0% for 15 years $250,000 at 6.5% for 30 years with biweekly payment
Monthly Payment $ 1,580.17 $ 2,109.64 $ 790.09 x 2
Mortgage interest cost over the life of the loan $ 318,861.22 $ 129,735.57 $ 245,426.40 and 70 months shorter term

There are many families who would like to have their house repaid before their kids start college and others who are in the peek of their earning potential. They would possibly prefer a shorter repayment plan, even if there are less mortgage interest tax deduction benefits.

You'd better consult a tax specialist and a mortgage consultant when determining which mortgage option suits your situation best.

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