Before diving into whether or not you should consider a 15-year mortgage, let’s talk about what it is. A 15-year mortgage, simply put, is a mortgage loan that you will pay off in 15 years. Because you are paying it in half as much time as a 30-year fixed mortgage, your payments will be higher. That being said, this type of mortgage loan will save you thousands of dollars in the long run because you pay interest for only half as long, and typically, 15-year mortgages already have lower interest rates. Also, 15-year mortgages help build equity in your home at a much faster rate than 30-year mortgages. The more equity you have in your home, the more cash you will receive if and when you decide to sell!
An important factor to consider if you are leaning towards a 15-year mortgage is your monthly income and debts. Based on the loan amount, can you comfortably afford the higher monthly payment that comes with this type of mortgage loan? The general rule of thumb is your mortgage payment should only amount to 28% or less of your gross monthly income. Making mortgage payments should not cause you financial stress, so you must consider if this is the right financial decision for you and your family.
Another reason to consider a 15-year mortgage would be if you currently have a 30-year mortgage at a higher rate! As previously stated, 15-year rates are typically lower, especially in today’s market. The difference in interest rate may make your monthly mortgage payment about the same, but for half as much time! You may be able to save a tremendous amount in interest if you refinanced your 30 to a 15-yar.
If you are still struggling with the decision of which type of mortgage would be best for you, make sure to check out our Compare Payments Calculator. This calculator provides an approximate monthly payment for both 15 and 30-year mortgages and the total savings over 10 years! The payment calculator will help you gauge what is financially applicable to you.
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