Expert Tip

 

Consider a 15-year, fixed-rate mortgage. It will save you big money in interest in the long run, versus a 30-year or variable rate mortgage.

 

For example:

 

$1,000,000 purchase price

$800,000 loan amount with 30 year fixed @ 4.25%

Total interest over the 30 year term $616,786

Total cost of home $1,616,786

 

$1,000,000 purchase price

$800,000 loan amount 15 year @ 3.5%

Total interest over the 15 year term $229,430

Total cost of home $1,229,430

 

Pros & Cons to a 15 year mortgage:

 

Pros:

Lower interest rate, pay off home faster, almost 400k savings, after 15 years you can put your 401k and Roth IRA’s in overdrive or have an extra 5k a month for college.

 

Cons:

Locked in to a higher monthly payment

 

We also recommend that your monthly mortgage payment be less than 25% of your total take-home pay. We realize that we live in Silicon Valley and this is very difficult to do but try to get as close to 25% as possible. Most banks will loan up to 44%. This is not necessarily in your best interest.

 

It is unlikely that you can get a 15 year fixed loan and have the payment be less than 25% of your take home pay but this should be our goal in a perfect world.  

Sereno Group

1100 Lincoln Avenue, Suite 170, San Jose, CA 95125

Jason Muth
Sereno Group

1100 Lincoln Avenue, Suite 170, San Jose, CA 95125

CA DRE License Number: 01159966