There are several reasons why a 15 year mortgage would be attractive. Of course, you pay off the mortgage in half the time. You get a lower interest rate which is always good. After you pay off your home, you can set aside the extra cash into savings or other investments. But is it right for you? Let’s take a look.
There are several ways a home-buyer can save money. From major moves like refinancing a mortgage, to more humble acts like bundling Internet and cable with one company, the savings potential for new or prospective homeowners is big.
Borrowers who are still shopping for mortgage loans, or those considering refinancing, may want to look at a loan with a term of 15 years instead of 30 years. Paying off the house in 15 years instead of 30 years has some advantages, as well as some challenges.
On the plus side, a 15-year loan typically means a lower interest rate. Most lenders offer a rate that’s at least a half percent lower than the rate for a 30-year loan, which means borrowers can pay much less interest over the life of the loan.
As for the downsides, because the borrower is paying off the loan in half the time, the monthly payment will be higher. It’s important the borrower is comfortable with the payment, and can afford it. This is the primary factor many opt out of the 15 year mortgage and stick with the traditional 30. Many think that going for a 15 year mortgage is doubling the monthly mortgage payment because your paying the house off in half the time. But that is not the case. Yes, the monthly payment will be higher than a 30 year but not double. Let’s take a closer look.
Save you want to purchase a nice home at $450,000 and are putting the traditional 20 percent down payment. You’re still not sure if you want a 30 year loan or a 15 year loan. Today’s interest rate for a 30 year is 3.375% and the 15 year is 2.75%.
Your 30 year mortgage payment would be $1,592. (principal and interest)
Your 15 year mortgage payment would be $2,552 (principal and interest)
Roughly for $1000 more you can pay your home off in half the time. I’d say if you can afford and are comfortable with the monthly payment go with the 15 year morgage.
Find out for yourself what your monthly payment will be.
Mortgage Calculator – How Much My Payment Will Be
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