Are you going to soon be applying for a mortgage, but you have yet to decide if you want to get a 15- or a 30-year loan? If so, it will help to know the following things to make a decision.
The Monthly Payments Are Different
One of the reasons that a 30-year mortgage is so popular is because of the big difference in the monthly payments. As you can imagine, paying off your mortgage over 15 years is going to result in payments that are higher. A 15-year mortgage won't be double the amount, but it is a significant amount more that you may be worried about paying. A 30-year mortgage locks you into that lower rate for the entire length of the loan, so if you are confident you can pay it now, you should be able to by the very end.
The Interest Rates Are Different
Taking a 15-year loan doesn't simply pay off the mortgage in half the amount of time. You also get a notable reduction in the interest rate. When combined with the fact that your interest is only adding up over 15 years instead of 30, it can lead to some significant savings over time. If you have no problems making the monthly payments for a 15-year mortgage, it will give you the most savings by reducing how much total interest you pay.
The Loans Can Be Paid Off As Fast As You Want
Even if you decide to get a 30-year loan, it is still possible to pay it off in 15 years without refinancing. That is because many 30-year loans give you the ability to make additional principal payments that reduce the length of the loan. If you end up getting a promotion, an inheritance, or are simply good at saving money, you can put that money toward your mortgage.
The Lower Payment Can Help With Investing
With interest rates being at historical lows, you may prefer a 30-year mortgage with a lower monthly payment for investment purposes. Instead of making additional payments or taking the 15-year loan with the higher monthly payment, many people use the money for investing purposes. If you feel like you can make more money than the interest rate that you're paying on your mortgage, it can be a great way to come out ahead financially.
For more information about home mortgages, contact a local lender, like Choice Mortgage.
