The 15-year and 30-year mortgages are the two most prevalent types of mortgages. A 15-year mortgage may have higher payments, but it allows the home to be paid off sooner. If someone is searching for a mortgage for a new house or to refinance their current home, a 15-year mortgage may be the better decision. The following are some of the advantages of choosing this over a 30-year mortgage.
Pay Off Your Mortgage Sooner
A 15-year mortgage helps a homeowner pay off their debt far more quickly. This means they won’t have to be as concerned with making house payments once they retire if their retirement date is nearing. For individuals who are getting older, paying off the mortgage twice as fast means they would not have to worry about how they will pay off the house if they pass away. Paying off the mortgage sooner is almost always the preferable alternative, as long as the payments aren’t too hefty.
Interest Rates are Lower
Interest rates we are able to offer vary depending on the term of the mortgage, among other factors. We can provide a cheaper interest rate on a 15-year mortgage because we know they will pay it off faster, and we will receive the interest payments sooner. This can save the homeowner a lot of money throughout the loan because they won’t have to pay as much interest as they would if they had a 30-year mortgage. Interest rates are now low, but additional reductions could be helpful.
Build Equity Faster
As a home is paid off, equity is built. As the mortgage is paid off, the homeowner gains equity in the amount of the house that they own outright. If a home is halfway paid off, the homeowner possesses half the value of the home in equity, provided the value has not increased much since the purchase. When homeowners choose a 15-year loan, they will pay off their mortgage faster, allowing them to develop equity sooner.
If the homeowner decides to seek a home equity loan or line of credit in the future for extra funding, they will have more equity than someone who bought their property with a 30-year mortgage at the same time.
As previously noted, a 15-year mortgage can save you a lot of money over a year. We can provide a lower interest rate, which means they will pay the interest in half the time because they will pay off the mortgage in half the time. The amount of interest saved over the life of a mortgage on a $250,000 home could be as much as $90,000. The 15-year mortgage has larger payments, but because it is paid off sooner, there are fewer interest payments, and, as a result, thousands of dollars are saved over time.
Possible to Reduce Monthly Payment When Refinancing
When someone refinances their house, they can get a 15-year mortgage. If interest rates have dropped substantially since they purchased the home, converting to a 15-year loan may be a better option than continuing to pay on a 30-year mortgage. This is dependent on a variety of factors, including the current versus new interest rate, the length of time the homeowner has been paying off the house, and more. It’s also possible that the mortgage payment will be around the same or slightly higher, but you’ll still save money on interest payments for the rest of the mortgage.