Mortgage loans aren’t one-size-fits all. With that being said, a program that worked for a friend, might not be the right fit for your situation. So before you borrow, make sure you know your options.
You may know that you prefer a fixed-rate mortgage over an adjustable-rate mortgage. And if you’re looking for a low down payment option, maybe you’ve already decided on an FHA home loan.
But there’s a mortgage option that you may not have considered—a 15-year mortgage.
A 30-year mortgage is a popular option, for obvious reasons. Since a 15-year mortgage cuts the mortgage term in half, a common misconception is that the shorter term doubles the mortgage payment. But this isn’t how mortgages work.
While it’s true that a 15-year mortgage will result in a higher monthly payment, the difference might not be as high as you think, which may put a 15-year mortgage within your reach.
BENEFITS OF A 15-YEAR MORTGAGE
1. Pay Off Your Mortgage Sooner
One benefit of a 15-year mortgage is the ability to pay off your home loan sooner. This mortgage option may be a good fit if you’re purchasing a home later in life, yet you want to retire mortgage-free.
But even if retirement is decades away, the sooner you get rid of your mortgage, the more cash you can save for other purposes. You could work on building your emergency fund, increase contributions to your retirement account, or possibly work fewer hours.
2. Build Equity Sooner
And because you’re paying down your principal sooner, you can build equity faster. This may lead to a bigger profit if you decide to sell the home, as well as protect the value of your house from market declines.
3. You’ll Save on Interest
A 15-year mortgage will also cost less over the life of the loan. In many circumstances, the interest rate on a 15-year mortgage is lower than other types of loans, including 30-year mortgages. And since the loan term is split in half, the total interest paid is less compared to a 30-year loan.
BENEFITS OF A 30-YEAR MORTGAGE
1. Lower Monthly Payment
The upside of a 30-year mortgage is a lower monthly payment. This provides more wiggle room, which can go to savings, retirement, vacations, and other purposes.
2. You May Be Able to Afford a Home Sooner
Since 30-year mortgages have lower monthly payments, it’ll be easier to afford your dream home, helping you purchase a property sooner.
But remember, the mortgage on a shorter-term might not be as high as you think. So crunch the numbers to see if a 15-year term is doable. And if so, seriously consider this option.
A 30-year mortgage is a popular, safe choice, but the benefits of a 15-year mortgage are undeniable (if you can afford the higher cost).
Don’t know which option is right for you? The loan experts at FirstBank Mortgage are happy to assist and estimate your monthly payment. Give us a call to schedule a consultation. We can answer your questions, guide you through the process, and help you decide the best loan for your situation.