Understanding the Features of a 15 Year Mortgage VS a 30 Year Mortgage
Two of the most important things that you will have to decide when you begin searching for a house is whether you want to take a 15-year mortgage or a 30-year mortgage. Despite the fact that a 30 years mortgage would be considered more typical and easier on the pocket in terms of monthly payments, there are a number of advantages with taking a 15 years mortgage that could prove to be not only quite cost effective. In this article, we’ll discuss some benefits that 15-year mortgage offer s over the 30-year mortgage so that when it comes to financing, you will not be confused.
Although choosing a 30-year mortgage frequently appears to be the better choice because you pay smaller installments with the loan repayment period extended to three decades, a 15-year mortgage can actually cost you thousands of dollars in interest over the period of time. You will pay off your mortgage earlier and will be able to gain more home’s own share more effectively having a shorter term. Also, it is essential to note that 15-year mortgages attract lower interest rates, making the interest portion you pay over the agreed time frame smaller as well. So whenever deciding whether to take a 15-year mortgage or not you’ll be making the financially wise decision which will be of advantage to you in the long run.
Comparison of Pros in 15 Years Mortgage Bond and 30 Years Mortgage Bond
In this article, two types of mortgages still in use are discussed, that is, the 15-year mortgage and the 30-year mortgage.
As between 15 years mortgage and 30 years mortgage there are following important advantages that one needs to look at. The two possibilities have their benefits and drawbacks and as a result, choosing between them will depend on the financial goals and the general financial standing of the investor.
Well, the reason one may opt for a 15 year mortgage is because it saves time and allows one to clear the home loan within half the time it takes for a 30 year mortgage. It can shave off a lot of money in terms of interest every given period or within the entire agreed loan period. Another advantage for the homeowner is that by paying off your mortgage early, it is possible to create home equity at a faster rate hence a secure future investment.
The other advantage of taking 15 years mortgage is that it attract a low interest rate than the 30 years mortgage. This means that when you are doing the monthly repayments it implies that you might end up paying thousands of dollars interests in the process of the supposed loan period. In addition, your monthly payment would be slightly higher, but the overall total interest accrued by you would be less because the interest rate is low and the term is less as compared to 30 years mortgage.
Selecting a 15 year mortgage also assist you in avoiding repaying on credit for a long time also. Becoming debt free in a shorter time is also a good reason to take a shorter loan term as you will have more money at your disposal for other needs and wants like preparing for retirement, starting a new business, or just travelling the world. Paying of a mortgage before the agreed time is beneficial because it helps decrease on the total amount of debt.
At the same time, the 30-year mortgage also has its advantages that might be more favorable for some clients. However, one of the drawbacks of having a 30 years mortgage loan is that client will get small monthly payment as compared to having a 15 years mortgage loan. This can help in making the owning of a home more easy for people who perhaps could not manage to afford bigger payments that come with the houses.
Also, since you are going for mortgage loan that has the ability to retire the loan within 30-years free from penalties you have the free will to put extra cash or pay up early. Such can be useful for the borrowers who may wish to have an opportunity to pay a little extra some time in the future toward their mortgage balance, when they have some extra money to spare, while at the same time having the security of paying lower amounts every month, in case of a misfortune befalls them financially.
Finally, it is possible to conclude that the criteria that will define a decision in favor of the available terms of 15 years or 30 years more will be individual with an emphasis on financial priorities and preferences. Even though you’d pay less interest and own more of the home with 15 year mortgage, you pay less each month with a 30-year mortgage. One should, therefore, take his/her financial position, financial plan and need for a mortgage seriously when selecting the best mortgage.
Finally, deciding whether to go for a 15-year mortgage or a 30-year mortgage all narrows down to ones financial plan. While taking a 15-year mortgage means smaller interest and earlier debt free life, a 30-year mortgage means lower monthly payment and more options. One has to be wise when it comes to assigning priorities to the financial requirements and it is always wise to seek advice from a financial planner to know which of the two is right for the applicant. All in all, both kinds of mortgages have strengths and weaknesses in their own rights, and thus they should be commenced with a suitable numerical ratio.
