In a perfect world, most people would prefer to pay their home off in 15 years instead of 30. But in the real world, that isn’t always financially possible. If you’re wondering if a 15-year fixed mortgage is a good option for you, there are four major factors that should be considered in the decision-making process.
- Lower interest rates – In almost all cases, you will get a lower interest rate with a 15-year fixed mortgage over a 30-year fixed mortgage.
- Shorter loan term – You’d be paying interest for half the number of years, so there are substantial savings over the life of the loan.
- Higher monthly payments – Significantly higher payments can make it harder to save for retirement, college tuition, and other expenses.
- Faster equity accrual– Since you’ll be making higher payments, your loan to value ratio will go down faster.
For some borrowers, the substantial savings attached to a 15-year fixed mortgage is too attractive to pass up. But the smartest borrowers take precautions to ensure that the higher monthly payments won’t become an issue over time. The best way to do this is by scrutinizing your income, expenses, and savings goals to make sure you’ll have enough to cover everything – with some money leftover – after paying your mortgage and other bills. To avoid going into debt, designate a savings account just for emergency expenses and incidentals. With the right planning and budgeting, a 15-year mortgage can be a very wise choice for those who can afford it.
If you are looking for a mortgage and aren’t sure whether a 15 or 30 year fixed rate mortgage is better for you, contact us at Cliffco Mortgage Bankers and we can discuss the pros and cons of each loan as it applies to you!