While the 30-year mortgage may be the most common, it’s not the right option for all homebuyers. In some situations, it’s the most expensive mortgage option you can choose – at least for the long term.
Since 15-year mortgage loans carry lower rates than 30-year mortgage loans, you will pay significantly less interest during their term. However, this is just one benefit offered by 15-year mortgages. Keep reading to learn some of the top reasons to consider a 15-year loan over a 30-year loan.
Pay Less Interest
As mentioned above, when you get a shorter loan, it means you get lower interest costs. Also, these loans come with much lower interest rates. Sometimes, this means thousands or tens of thousands of dollars in savings.
Repay the Loan Sooner
If you choose a 15-year mortgage, you will be paying higher monthly payments. However, this also means you will repay the loan – in full – much sooner. If you took out a 15-year loan in June of 2021, you would have it repaid by June of 2036. With the 30-year loan, this mortgage would be with you until 2051.
You Are Refinancing Your Loan
If you plan to refinance, 15-year loans make sense. Even though mortgage rates are still low, you may be able to reduce your term and get a much lower interest rate. You can also maintain your monthly payment, which will be very close to what you pay now. This is a clear win-win situation.
Focus on Higher Yield Investments and Retirement
If you choose a 15-year mortgage, you can eliminate the monthly payment you have to make much faster. This means that you get more cash flow and additional funds to put toward the stock market, retirement, and other high-yield investments. Also, you can save on interest, which will provide you with more wealth in the long term.
A Consistent and Solid Income
It is important to note that while there are huge benefits to using a 15-year loan, these will come with much higher monthly payments. With a consistent income, you will be able to handle making the higher payments. These loans are usually going to be your best bet. You will save most in the long run, and you will have your home paid off much sooner.
Is This the Right Option for You?
When it is time to choose a mortgage, you should consider all your options, including a 15-year mortgage. These offer many benefits, including the ones mentioned above.
If you are on the fence regarding what is right for you, it is best to speak with a mortgage lender. This will help you make an informed decision regarding what you should try to acquire for your financial needs, both short- and long-term.
Remember, mortgage rates are changing all the time. This means you need to keep up with market trends to ensure you make the best possible decision. This is also something the professionals can help with.
