Why a 15 Year Mortgage Makes Sense
March 15, 2017
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Most homebuyers opt to pursue a 30-year mortgage, and while that's an appealing option, buyers should also consider a 15-year loan.
Buyers should first contemplate a 15-year mortgage if they know they can afford the higher monthly payments. When taking out this type of mortgage, homeowners need to budget appropriately because they'll need to pay off the principal balance in half the time of a standard mortgage. By paying off the balance sooner, homeowners will be able to prioritize other financial matters, such as retirement planning or paying for a child's college tuition.
Homeowners can save money
One major benefit of a 15-year loan is the opportunity to save money due to lower interest rates. According to The Mortgage Reports, a shorter mortgage can make sense if homebuyers don't have a large amount of debt to their name and housing represents their largest monthly expense - they'll likely be able to comfortably pay off the mortgage in a shorter amount of time. Even so, homebuyers should still make sure their income is steady, recommended The Motley Fool. Tackling a bigger mortgage payment can be difficult to overcome if buyers don't have a stable career and income they know will pay the bills.
And after 15 years, homeowners don't have a mortgage to worry about anymore.
Finally, a 15-year mortgage helps homeowners build equity faster because they pay less in interest, Money Crashers explained. With a 30-year loan, interest is higher and more time is needed to pay off the principal, so equity doesn't build as quickly. Homeowners can then use that equity to help buy a new home or fund repairs.
If homeowners have a steady income source and can handle the larger payments, they should consider a 15-year mortgage. By opting for the shorter loan, homeowners can pay off their house faster while saving more money.
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