The 15-Year Mortgage: What You Need to Know

With low interest rates still prevailing through the middle of the current decade, many home buyers want to know about the advantages (and disadvantages!) of 15-year mortgages.

Do you know the ins and outs of this popular investment tool? Are “fifteens” always a good idea? How can you figure out whether to opt for a 15-year mortgage or the more traditional 30-year note? These and other questions are addressed in a recent Bankrate article that hits on all the major attributes of 15-year mortgages. Here’s the gist of what the experts are saying about this exciting option:

  •  The 15-year fixed-rate mortgage is a fast way to build equity in your home, which is the primary reason many consumers choose it.
  •  Just like the 30-year mortgage, the 15 offers stable payments and interest rates for the duration of the contract.
  •  While principal and interest do remain static for the 15 years, there could be a change in the amounts paid toward homeowner’s insurance and property taxes, which could slightly change month-to-month payment amounts, either up or down.
  •  Most borrowers who choose the 15-year mortgage point to the “fixed” features of principal and interest payments, as well as the rapid rate at which they are able to build equity as the key advantages.
  •  On average, the interest rate you’ll pay on a 15-year mortgage is lower than what you’d pay on a 30-year note.
  •  Because the rate is fixed, those who buy a home on the 15-year plan will have to refinance in order to take advantage of lower interest rates, if and when they occur.
  •  Another rather obvious disadvantage of the 15-year mortgage is that payments must, due to laws of simple mathematics, be higher than they are with a 30-year mortgage agreement.

Every buyer is different, and economic conditions seem to change with the weather. So make sure to discuss the pros and cons of a 15-year mortgage with your banker and real estate professionals before deciding to go this route. That said, the 15 has recently enjoyed a surge of popularity for many reasons, and it is a great way to ramp up your equity in a short amount of time. It’s a good idea to consider all the options before setting out on the journey of home ownership.

 

 

 

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