- 1). Ask your mortgage lender to give you a good-faith estimate and truth-in-lending statement on a 15- and 30-year mortgage. Make sure that the loan amount is the same on both mortgages to compare the same information.
- 2). Note the difference in the interest rate. The 15-year interest rate should be lower than the 30-year interest rate.
- 3). Note the closing costs as listed on the good faith estimate; aside from the daily interest expense, the overall closing costs should be close to identical.
- 4). Review the truth-in-lending statement. The first box on the page lists the APR (annual percentage rate). This is the numerical representation of the total cost for the mortgage for a full year, including both the monthly interest rate and the closing costs. The loan with the lowest APR is the lowest-cost mortgage option.
- 5). Choose the mortgage option that works the best with your budget. In the long run, the 15-year option will be the cheapest, but if the monthly payment is too high for your budget, it is not the best option for your family.
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