The Real Cost of Buying Your Home

Buying a home is exciting – realizing how much you pay in interest payments isn’t. Learn how paying your mortgage faster can save you money in the long run.

Transcript:

The Real Cost of Buying Your Home

[video: Text appears that reads: "Kiplinger presents The True Cost of Buying Your Home" followed by "Sponsored by Mutual of Omaha". A business woman speaks to the camera. In the bottom left corner text appears that reads: "A Special Report from Kiplinger's Personal Finance".]

Buying a house is one of the biggest purchases you’ll ever make. So, no doubt you realize how important it is to shop around for the best mortgage rate. After all, a great rate helps keep your monthly payments manageable.

But here’s something many people don’t know: You could end up paying almost as much — or even more — in interest than you paid for the house itself! And that’s true even if you get a really great rate.

[video: Text appears that reads: "$250,000 mortgage at 4% interest for 30 years" followed by text stating "If you make all of your payments on time you pay $179,000 in interest". The 4% interest rate then changes to 5.5%.]

Let’s say you take out a $250,000 mortgage at 4% interest for 30 years. If you make all your payments on time, you’ll still pay more than $179,000 in interest over the life of the loan. Bump up that rate to just 5.5% … historically, that’s still a low rate … and suddenly, total interest owed soars.

[video: Text appears that reads: "You've paid $511,000 for your $250,000 home".]

Without even realizing, you’ve paid more than $511,000 for your home! Fortunately, there’s a way to shrink interest costs significantly. Paying down your mortgage faster can save you thousands. For example, let's say you're willing to pay a little extra each month on your $250,000 mortgage over the entire 30 year term.

[video: Text appears that reads: "Adding $50 to your monthly payment would save you almost $25,000 in interest".]

If you're paying 5.5% interest, adding just $50 to every monthly payment would save you almost $25,000 in total interest. Refinancing a 30 year mortgage to a shorter term can lead to even bigger savings. Many online calculators exist that can help you determine exactly how much. Simply search for "Mortgage Refinance Calculator" and be prepared to enter basic information about your current loan as well as the interest rate, term, and fees for a new loan. Want to know more? Speak to a financial advisor for more ways to accelerate your mortgage and your savings.

[video: Text appears that reads: "Kiplinger presents" followed by "Sponsored by Mutual of Omaha".]