Title:
30 Year vs. 15
Year Mortgages
Word Count:
375
Summary:
Discussions of
mortgages often focus on interest rates, but there is a much more basic
decision to make. Should you go with a 30 year mortgage term or a 15 year
mortgage term?
Keywords:
mortgage, term,
mortgages, loan, loans, interest, payments, interest rates
Article Body:
Discussions of
mortgages often focus on interest rates, but there is a much more basic
decision to make. Should you go with a 30 year mortgage term or a 15 year
mortgage term?
30 Year vs. 15 Year Mortgages
Any discussion of mortgages tends to turn on two points. How can you qualify
for the most money with the lowest payment? How can you get the lowest interest
rate for the mortgage? While these are two important issues, there is an
addition one that people fail to consider, resulting in significant wasted
money.
The term of a mortgage is extremely critical for a couple of reason. First, it
sets the length of the obligation you are undertaking. Second, it defines the
amount of interest you are going to pay over the life of the loan. These are
huge issues when it comes to building equity.
The longer the loan, the more total interest you are going to pay. The trade
off, of course, is you are going to have smaller monthly payments the farther
you stretch out the obligation. While this may sound like a good goal when you
first get the mortgage, it can backfire on you in the long run.
Most people focus on interest rates as a way to save money on mortgages. This
is a valid approach, but playing with the length of the loan is a better way to
save money. If you can cut the payments in half by going with a shorter loan,
you can save huge amounts on the total interest repaid to a lender.
The decision on the term of the loan is relatively simple, but entirely
dependent upon your personal situation. There is no absolutely correct choice.
First, you need to determine if you can comfortably afford the higher payments
that come with a shorter term loan. In general, a 15 year mortgage will have
payments 20 to 25 percent higher than a 30 year loan. Of course, you will pay
the loan off faster, to wit, be building equity in the home quicker.
The modern mortgage industry has a variety of different term length products. When
applying for a loan, take the time to evaluate the different terms to see if
you can find a loan that is perfect for your situation.