Whenever you look for a loan, what is the typical question the typical person will ask? What is the interest rate and how low are the payments? That way of thinking will typically get you in trouble financially. All loans consist of five components - loan amount, interest rate, payment, loan duration/time, and the total interest paid over the life of the loan. Most everyone's primary concern is the interest rate and payment, but the interest rate doesn't have the greatest impact upon the loan. Time has the greatest impact. The actual question which should be asked is how long will it take to pay off the loan and how much total interest will be paid? The shorter time period will result in the payments to increase which results in the loan to be paid quicker and since the loan is paid quicker, the total interest paid will decrease dramatically. Refer to the following chart to see how a lower interest rate doesn't save on the total cost for purchasing a home as much as a shorter time period.

loan amount		$200,000      $200,000      $200,000      $200,000
interest rate                 7%            6%            5%            7%
total interest paid	$279,000      $231,000      $186,000      $172,000
time (years)                  30            30            30            20
interest saved                $0       $48,000       $93,000      $109,000
time saved                     0             0             0            10
payment                   $1,330        $1,199        $1,073        $1,550