Let’s break it down for you. We will give you the pros and cons of two popular mortgage options and hope that it helps you decide which one you will go with.
15-Year Fixed Mortgage
- This option will allow you to pay off your home faster. Fifteen years faster, that is. Because it is a fixed rate, the monthly payment will never change. Also, since the loan period is
much shorter, the interest rates will be less. This means over you will pay less overall for the home compared to a 30-year option.
- Because you are paying it off faster, you will have higher monthly payments. These higher payments could make it harder for you to qualify for a loan. Your finances need to be in order,
and you need a steady source of income to obtain these larger payments.
30-Year Fixed Mortgage
– With this mortgage, your monthly payments will be significantly less. For the first years, most of the payments made go towards the interest, which allows the borrower to use that amount
as a tax deduction – another perk! You also have the flexibility to lessen your 30 years by adding more money to your monthly payments when it is affordable to you. Also, because you are paying less each month, it is easier for you to qualify for a loan.
– Since this loan is double the length of the 15-year option, you will end up paying substantially more in interest payments by the time your house is paid off. If you buy a $300,000-dollar
home, you could end up spending tens of thousands of dollars more on interest. The lower payment also makes it more appealing for people to buy a more expensive home than they can afford. Don’t fall into this trap!