30 Years or 15 Years, Which Is the Best Mortgage Option For You?
You have finally lined up all of your ducks and now you are ready to purchase your first home. You have been counselled and now understand just how important the decision to purchase is. Now let me give you one more issue to consider; will you settle for a 15 year or a 30 year mortgage. I know, you have only considered the usual 30 year option. Well a 15 year mortgage (or less) has some upsides that you should look at. As your lending consultant/loan officer, let’s talk through this.
The basic difference between the two options (30 year or 15 year) other than the term are the interest rates. As I have mentioned previously, the shorter the term, the better the interest rate. However with the shorter term there is a higher monthly payment, which means that you pay more on your principal monthly. And since a mortgage is a long game for most of us, you will save money paying off the mortgage in a shorter period of time with a lower interest rate by paying less overall. Do I hear vacations with the savings?
Now if I look into my crystal ball, I would bet that you are thinking that your monthly payment will double if you settle for a 15 year rather than a 30 year mortgage right? WRONG! A 15-year mortgage is structured where your payment is approximately 40 to 50% higher than the 30 year option. For example, you are considering settling for a 30 year mortgage on a $200,000.00 mortgage (at a 5% interest rate) with a monthly payment of $1,069 a month. But with a 15 year mortgage on the same $200,000.00 home, with a 3.5% interest rate, (remember shorter terms have better interest rates) your payment would only adjust to an additional $339.00 monthly for a total of $1,408. The additional $339 payment a month can save you 15 years of payments and interest.
Still thinking about it. Well, for full disclosure there are other costs/fees to consider just like with any mortgage, but you know this already. Remember your home buying class; you will still have insurance, taxes, HOA, closing costs and other (possible) costs to consider. But this is standard with all loans. Nothing new here. (We can cover all of the specifics when we sit down together.) The only other considerations are your personal preferences due to your current and expected future financial picture. All of which I am sure we will discuss when the time comes. This is also when I will play devil’s advocate and throw-out every possible situation for you to consider. Remember, I am here to assist you to make the best possible decision for you and your family. So it’s time to stop thinking and act, so call me, Brian @ 832.767.9375 and let’s get started.