The 30-year fixed rate mortgage is one of the most popular types of mortgages. While the 30-year mortgage provides you with a lower monthly payment, a shorter, 15-year mortgage may provide you with advantages that you should take into consideration. While the obvious advantage of interest rate savings is the key attribute that most people pay attention to, there are other reasons the best home loan for you may be a 15-year mortgage and not a traditional 30-year loan.
15-Year Fixed Rate Mortgages Save Interest Payments
If saving a large amount of money on interest payments is the primary goal for you, you may want to choose a 15-year mortgage instead of the 30-year variety. Here’s an example: a $200,000 house, purchased without a down payment on a 30-year fixed rate mortgage at 4.78% APR will add over $176,000 to the purchase price in interest payments alone. A 15-year fixed rate mortgage would save you over $110,000 in interest payments over the life of the loan. Of course, the 15-year loan increases your monthly mortgage payment by $400; you must make a decision based on your priorities and financial situation. If lower interest payments are more important to you than a low monthly payment, a 15-year mortgage may be the best home loan lenders can offer you because of this incredible savings in interest payments. Not only will you be out of debt 15-years sooner than with a 30-year mortgage, but you end up with more money in your pocket to save or invest in other financial assets.
15-year Mortgages Provide Flexibility
As a homeowner, paying off a home mortgage provides gives you more flexibility. The best home loan for you may be one that is paid off in 15-years because it will free up those mortgage payments, so you can accomplish other financial goals, such as saving for retirement or a child’s college tuition. Even if you sell the home before the final mortgage payment, the amount of equity you have built up will be more than would have been available if the mortgage had originally been the standard 30-year home loan. More equity in a home provides you with more options in establishing a selling price to help move the sale forward if required.
While the lower monthly mortgage payment is a great feature of a 30-year fixed rate mortgage, you should not immediately discard the idea of getting a 15-year term mortgage loan. There are many benefits to paying a mortgage earlier to consider as well. The best home loan lenders will offer you several mortgage solutions that are both affordable and prevent you from taking out a larger loan than you can afford. Think about the added financial freedom that you would have without a monthly mortgage payment! Paying off your home loan as quickly as possible may become one of your top priorities.