Wells Fargo Refinance Interest Rates – It’s the start of home buying season, so I wanted to address the age-old question, “Should I get a 30-year or 15-year mortgage?” and give me my knowledge.
Buying a home is likely to be one of the biggest transactions of your life. Buying a home can be an emotional process – one where you can’t help but think more about what you want
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The decision to choose a 15-year mortgage or a 30-year mortgage can ultimately have a bigger impact on your personal finances than any other decision you make. Unfortunately, many people don’t consider the higher monthly payments of a 15-year mortgage, so they instinctively choose a 30-year mortgage. This decision could cost them hundreds of thousands of dollars. The specific method is as follows:
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Let’s give an example. Our mortgage model would be for a $500,000 home, with 20% going toward the down payment. The original mortgage balance will be $400,000. Our mortgages will start in March 2019. For our mortgage rate, we will use the Wells Fargo rate posted on their website on March 20, 2019. No matter when you look at it, the difference between the 15 year and of 30 years will remain essentially the same. So we’re looking at 3,500% for the 15-year and 4,125% for the 30-year. On paper, this spread doesn’t look like much, but it will have a huge impact.
Let’s start with the 30 year period. Based on the information above, we assume a monthly payment of $1,938.60. Let’s look at 15 years now. Based on the information above, we assume monthly payments of $2,859.53. An additional $920.93 per month. But that doesn’t tell the whole story.
The total interest paid on a 30-year loan is $297,896, while the total interest paid on a 15-year loan is only $114,715. By making the smart decision early and choosing a 15-year mortgage, you’ll save $183 in interest and $181 in interest. Imagine having extra money in your bank account and the endless possibilities it would create for you and your family. This money can be used to achieve multiple long-term goals, or it can be invested and developed.
Let’s go a step further. Your 15-year term will be paid off in February 2034. Your 30-year term will not be paid off until February 2049. d will be paid off by then.
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It is clear that a 15 year mortgage is far superior to a 30 year mortgage in terms of interest and repayment date.
What if you had a 30-year mortgage but invested the difference in your monthly payment of $920.93 in the stock market for 30 years? So let’s compare someone to someone who has a 15-year mortgage, but won’t invest anything until the mortgage is paid off. After that payment is made, he invests his monthly payment of $2, $859.53 in the stock market. After 30 years of investing, who ends up with more money? The answer may surprise you.
In our example, we will do all calculations in today’s dollars. We will assume that everything is compounded at a return of 6% per annum, which would be a fairly risk-balanced portfolio with inflation at 2.5% per annum.
***FYI, over the 40-year period from December 1978 to December 2018, the average annual return of the S&P 500 (before reinvesting dividends and adjusting for inflation) was 8.559%. ***
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Here is a chart comparing the two. After 30 years, you’ll have $657, $962 for a 15-year mortgage and $562, $542 for a 30-year mortgage. The significant difference is $95, $420. If having more money to invest and paying less interest doesn’t convince you to go the 15 year mortgage route, then I don’t know what I can do to convince you.
One final point to consider during your home buying process. Having a few trusted faces in the home buying process to inspire you to buy the most expensive home you can qualify for makes a big difference in the home you can afford. It’s easy to think they’re the same thing, but this way of thinking can have a huge impact on your financial future. This approach was the catalyst for the Great Depression.
Affordable, a home you could pay off 30 years ago and the lowest interest rate you can get. A real estate agent or broker earns a commission based on the price of the home they find you, so they likely have an incentive to find you a home. interest; qualify for the mortgage you are applying for The higher the loan amount, meaning the more interest they earn in the long run. This means reducing your monthly payments by increasing your loan repayment terms and maximizing the debt-to-income ratio that insurers pass on to increase the amount of home you can ‘afford’. Banks will try to make you look as risky as possible while qualifying you for a mortgage. The riskier you are, the higher your mortgage rate will be to compensate for the increased risk.
I’m not saying that everyone will try to take advantage of you. There are good real estate agents and bankers out there who will act in your best interest. What I am saying is that you need to know your budget during the home buying process – and stick to it. although it is
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It will be tempting to increase your budget when you see what an extra $100,000-$200,000 can get you, and it will be easier to stay focused when you know the numbers and how they affect your future without getting stuck.
More than 28% of your monthly income. If your annual household income is $120,000, that means your monthly payment (including loans, property taxes, HOA and homeowner’s insurance) must not exceed $2,800. It will be tempting to go with the 30-year mortgage when you see the bank saying you qualify for more home, but I urge you to stay disciplined and stick with the 15-year. This is how wealth is built – a long-term perspective, a plan and a consistent approach.
If you’ve read this far, chances are this is affecting your life right now. If you are buying a home or find that your current monthly payment is too much, schedule a meeting through the button below and I can help you make a plan. Just click for a free initial consultation to start the process. I look forward to hearing from you and helping you develop a plan that will help you achieve your goals in the years to come.
Full Disclosure: Nothing on this website should be construed as advice, research or a solicitation to buy or sell any security. Please see our disclaimer page for the full disclaimer.
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Shaun Melby, CFP® provides fee-based financial planning and investment management services in Nashville, Tennessee. Melby Wealth Management serves clients as a fiduciary and never earns a commission of any kind. Sean has over 10 years of experience as a financial advisor in Nashville. Mortgage rates hit record lows during the pandemic, giving homeowners an opportunity to refinance and ultimately reduce their long-term interest costs. However, not everyone has the same level of access to this once-in-a-lifetime opportunity.
According to a Bloomberg analysis released March 11, only 47 percent of Black homeowners who reapplied in 2020 were approved by Wells Fargo, compared to 72 percent of white homeowners.
While white applicants have higher approval rates at all major lenders, Wells Fargo, in particular, lags other major lenders in approval ratings among minority applicants. Overall, 71 percent of Black refinance applicants in the country were approved in 2020, according to a Bloomberg analysis.
Wells Fargo, the third-largest US bank by assets, is the only bank that turns away more black applicants than it accepts. Black homeowners face more refinance rejections than other minority applicants, such as Hispanic homeowners and Asian homeowners, whose Wells Fargo acceptance scores are 53% and 67%, respectively. However, Paul Turner, Wells Fargo’s senior vice president of executive communications for consumer lending, disputed Bloomberg’s conclusion, saying
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Bloomberg’s data “is based on analysis designed to paint a distorted picture of our lending efforts” and ignores the bank’s “strong track record of lending to black homeowners.”
In 2020, JPMorgan Chase accepted 81% of refinance applications from black homeowners, compared to 90% from white homeowners. Bank of America approved 66% of black applicants and 78% of white applicants. Rocket Mortgage LLC approved 79% of black applicants and 86% of white applicants. While most lenders present a difference of around ten percent
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