When people talk about mortgages, they often talk about interest rates, but there is a much simpler choice to make. Should you choose a mortgage term of 15 years or 30 years?
30 Year vs. 15 Year Mortgages
When people talk about mortgages, they tend to talk about two things. How can you get the most money for the least amount of money? How do you get the lowest mortgage interest rate? Even though these are two important things, there is one more that people don't think about, which wastes a lot of money.
The length of a mortgage is very important for more than one reason. First, it tells you how long you have to do what you have to do. Second, it tells you how much you will pay in interest over the life of the loan. When it comes to building equity, these are big problems.
The more time you take to pay back a loan, the more interest you will have to pay. The trade-off is, of course, that your monthly payments will get smaller as the due date gets further away. When you first get a mortgage, this may sound like a good goal, but it can hurt you in the long run.
Most people who want to save money on mortgages look at interest rates. This is a good idea, but a better way to save money is to play with the length of the loan. If you can get a shorter loan and cut your payments in half, you can save a lot of money on the interest you have to pay back.
The decision about how long the loan will last is pretty easy, but it will depend on your own situation. There is no one choice that is always right. First, you should figure out if you can afford the higher payments that come with a loan with a shorter term. In general, the payments on a 15-year mortgage will be 20–25 percent higher than those on a 30-year loan. You will, of course, pay off the loan faster and build equity in the home faster.
There are a lot of different term length products in the modern mortgage market. When you apply for a loan, take the time to look at the different terms to see if there is one that fits your needs.
