How To Get A Better Deal On Kit Home Mortgages - part 2

by Steven Boaze

Do you forget about the second bank and stay with your bank? Or walk in and sign a deal with the second bank? Or look for other alternatives? None of those answers is wrong, but, as is usual in life, some are better than others. For instance, you may decide that because of your past relationship with your bank, you'd rather place your mortgage there. That may be the right course, but before you make up your mind, take time to calculate what that loyalty is going to cost.

Assume that you want to borrow $70,000. At 8 percent, amortized over 25 years, your monthly payment would be $540.27; at 7.5 percent, you'd pay $517.29. That's a difference of only $22.98.

But the argument for switching becomes a bit more compelling when you multiply the monthly difference by 12 and realize you've given your 8-percent mortgage lender an unnecessary $275.76 over a year. While that's not a vast sum, it's a credit that would look better on your personal balance sheet than it would in the bank's annual report.

Now, take a look at just how astonishing those numbers really get. You're looking at a 25-year term for your Kit Home mortgage. So over that time, you'll pay $6,894 more by taking your bank's mortgage. If you signed with the second bank, you could put that money aside.

Now that you've seen the difference just half a point can make, look at some even more amazing numbers. Mortgages are set up in such a way that for the first several years, most of the money you pay is interest. Very little goes toward reducing your principal.

What this means is, simply that any additional payments you can make in the early stages of a Kit Home mortgage will have an almost unbelievable impact on the total interest you'll have to pay to make your Kit Home your own. Current federal-tax laws allow you to deduct Kit Home mortgage interest you pay. So, you will have to take that into consideration when you determine the net savings after you find a cheaper rate of interest.

Copyright (c) Steven Boaze

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