Are 15 year mortgages a good option?
Many homeowners are refinancing their home loans to take advantage of lower interest rates and some are going to 15 year mortgages to pay off their loans faster. A 15 year loan often comes with a lower interest rate but a higher monthly payment. There are a few factors to consider before jumping into a shorter loan:
- Homeowners that have a steady and predictable income and/or want and need to pay off their loan faster may be a good candidate for this special loan.
- The total cost of a 15 year loan is usually less than the cost of a 30 year loan and once the loan is paid off, lot’s of income is freed up.
- 15 year loans have a larger monthly payment than their 30 year counterparts which may be difficult for some homeowners. Those with a budget that allows for a larger mortgage payment may want to look into these shorter loans.
- If you want to try a 15 year loan but you aren’t confident you can make the larger mortgage payments, do a 30 year loan but make 15 year loan payments. This way you can pay down your loan much faster but you are not obligated to make the large payments. The only downside to this is that the 30 year loan will most likely have a higher interest rate.
- Typically a good candidate for a 15 year loan is a homeowner who is close to retirement and doesn’t want to be making mortgage payments once they do retire.
- No matter what loan type you choose to go with, shop around for the best rate and be sure to fully understand the terms of your loan.
