Thinking about foregoing your 30-year mortgage in favor of a home loan that lets you pay off what you owe in half the time? If you want fewer mortgage payments, less interest over the life of the loan and a lower interest rate, then you might want to consider a 15-year mortgage. According to Trulia.com, here are some reasons you might want to think about this type of mortgage.
You’ll save money
Taking out a 15-year mortgage decreases your home-loan repayment time. The faster you repay the loan, the less interest you need to pay. This can save you tens of thousands of dollars over the shorter life of your loan. A 15-year mortgage also usually offers better interest rates than other loan products. Curious about just how much money you could save? Check out this mortgage calculator and plug in the numbers to compare amount of payments, interest rates and more.
You’ll build more equity
Repaying your mortgage faster not only saves you money, but it also can allow you to build equity in your home faster. Combining a shorter mortgage term with rising home prices could exponentially grow the amount of equity you have. This is beneficial for several reasons, especially if you plan to refinance: you’re paying principal faster with a 15-year note, meaning you’re building equity faster and making refinancing potentially easier, and with a smaller loan-to-value ratio, you present a smaller risk to your lender and should have more financial opportunities.
You’ll lessen pressure on your monthly retirement budget
If you plan to retire in the next 10 to 20 years, obtaining a 15-year mortgage might help. Many people want to downsize before retiring, which means buying a new home. A 15-year mortgage can allow you to maintain a stronger cash flow while you’re working to make bigger monthly payments and pay off the loan before you retire. Then, upon retirement, you won’t have to use as much of your savings to cover living expenses.
You’ll be able to take advantage of the built-in discipline
Some people prefer the flexibility of taking out a 30-year mortgage and then accelerating the loan payments, which enables them to save money on both interest and monthly payments. However, this can make it too easy to fall back on making smaller, easier payments and to use the extra money for other purchases instead.
