Of all the decisions you will ever make in your life, the purchase of a home will be the most consequential of all. Needless to say, it will also be one of the largest investments you will ever make as well. Unless you’ve just won the Powerball or were born into a great deal of wealth, you’ll most likely have a mortgage attached to that purchase. And that would take a while to be paid back. The more common 30-year mortgage is a multi-decade commitment that you cannot walk away from without enduring adverse consequences. It is for this reason that many of today’s home buyers are choosing 15-year mortgages instead. They try to pay it back as quickly as they can to save more. Choosing a 15-year over a 30-year mortgage has a number of potential benefits. However, there are also two reasons for reconsidering this choice.
Choosing a 15-Year Mortgage
- You might get a lower mortgage rate – keep in mind that the interest rate on your mortgage will affect everything from the amount of interest you pay, how much your monthly payments will be, and the total cost of your home.
- You will build more equity faster – building equity with a 30-year mortgage can be a painfully slow process as most of your payment goes towards interest rather than principal. When you opt for a 15-year mortgage, you’ll build that equity twice as fast.
- You will own your home in half the time – this is probably the biggest benefit of the four. It certainly is tempting and possibly the most compelling reason for getting a 15-year mortgage instead of a 30-year note.
- You will save money – compared to a 30-year mortgage, the savings are significant when you go the 15-year route. Remember, every dollar saved is an additional dollar that you can invest.
While there are several benefits to enjoy when opting for a 15-year mortgage, here are a couple of things to consider:
- You will be tying up more of your money – building equity quicker is certainly a tempting benefit. However, there’s a serious tradeoff involved when you think about how more of your money will be tied up with a 15-year mortgage.
- Your payment will most likely be higher – the reason you’ll be paying off your home quicker with a 15-year mortgage is that you’ll be making larger monthly payments. Granted, the lower interest rate might mitigate some of the financial damage, but your monthly payment will be higher.
Buy A Home or Refinance with Florida State Mortgage Group, Inc.
To learn more about 15-year versus 30-year mortgages, call Florida State Mortgage Group, Inc. at (954) 359-3000 today.