The 15 year fixed mortgage is a popular choice for homebuyers who plan to purchase and pay off their house over time. This loan structure offers numerous advantages, such as lower interest rates and the potential to build equity faster in your house. But before making your decision about whether or not this mortgage works best for you, be sure to understand both its pros and cons.
A Low Interest Rate: 15 year fixed mortgage interest rates tend to be much lower than 30-year ones, as lenders are less exposed to risk with a shorter tenure. This could result in better terms and rates when refinancing your home if you need it sooner than planned or need extra equity for renovations or investment property purchases.
Shorter Payments: For homeowners, monthly mortgage payments can be a huge burden. Therefore, it’s essential to select a loan term that allows you to eliminate your financial obligation quickly. A 15-year mortgage structure helps you repay your mortgage faster, freeing up extra funds for savings or investing elsewhere.
Lower Home Payment: With a 15-year mortgage, your payments will be approximately half as much as with a 30-year loan. This makes budgeting much simpler if you’re having trouble managing other debts.
A More Affordable Housing Budget: With a higher monthly mortgage payment, it is essential that your housing costs don’t exceed 30% of your overall monthly budget. This number can be calculated by adding together taxes, insurance and mortgage payments as well as any other expenses you have.
Calculate your current household income and debts, then compare them with monthly housing expenses. Doing this will give you a good indication of how much you can borrow while still fulfilling other responsibilities.
Consider Your Career and Future: If your career prospects look promising in a field with high income increases over time, a 15-year mortgage might be beneficial to you. This is because payments will become smaller percentages of your income as you progress in your profession, making it more affordable to meet repayment obligations with this type of loan.
Your Goals: If you’re thinking of purchasing a house, having an action plan for how to reach your homeownership objectives is essential. This includes figuring out how you will pay off the mortgage and build equity in your house over time.
How Long Will It Take to Reach Your Goals?: Repaying your mortgage and having equity in your home requires a significant amount of work, so it’s essential that you stay informed throughout the process and monitor your progress so that you can reach these financial milestones as quickly as possible.
