If you are ready to fill out an application for a mortgage loan, one of the things you might want to think about is whether you would prefer to take a 15-year mortgage or 30-year. The most obvious difference in these is the amount of time it will take to repay the loan in full, but, before you jump into a 15-year loan, you should really compare all the facts about these two loans, first. Here are several things to consider, as you make this decision.
30-year loans are the most popular because they are easier to afford
The first thing to know about these two loan options is that 30-year loans are much more common and popular than 15-year loans. The main reason for this is affordability. Affording the payments on a 30-year loan is much more feasible for most families and people than making the payments on a 15-year loan. Now, the payments for a 15-year loan are never double than what they would be for a loan that is twice as long, due to the difference in interest, but the payments will be significantly higher for a 15-year loan.
A 15-year loan offers key benefits
For people who can afford to pay higher payments, there are a lot of great benefits of choosing a 15-year loan. The first benefit is the obvious one, where you will pay off your house in half the amount of time. If you are really young, this might not matter as much as it would, if you were buying a house in your 40s or 50s.
Secondly, choosing a shorter loan will result in spending a lot less in all, for the house, and this is due to interest. Not only do 15-year loans have lower interest rates, but they allow you to pay off a loan by paying significantly less interest on the house, primarily because you are only borrowing the money for 15 years instead of 30.
Choosing 30-years might be best, if you buy points and pay extra
If you do not feel that you could afford to pay off your loan in 15 years, you could stick with a 30-year loan. To get the most out of the loan, you could purchase points on it, which will reduce the interest rate. Buying points is a great idea, if you plan to keep the loan for a loan time. Secondly, with a 30-year loan, you could always pay a little extra each month to reduce the time it takes to repay the loan in full.
If you have questions about mortgage loans, interest rates, or loan types, contact a home loan provider.
Share11 July 2019
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