Over the past year there have been lots of discussions about the possibility that mortgage interest rates are on the rise. This has resulted in a lot of people considering a home purchase or a home refinance to capitalize on the low rates before they are gone.. With interest rates still very low, it’s not to late to refinance your home mortgage and there are a lot of reasons to consider a 15-year vs. 30-year mortgage.
1. Reduce the Interest You Pay – One of the major benefits of a 15-year loan is that the interest rate is lower then a 30-year loan. This allows you to pay off your loan balance in less time with a smaller increase in monthly payment. By reducing the rate you are also reducing the total interest you pay over the life of the loan.
2. Shorten the Repayment Time – Imagine if you could reduce the 20 years remaining on your mortgage by 5 years. For most of us our mortgage is the largest monthly payment that we make each month. Being able to stop that payment 5, 10 or 15 years sooner means you can re-allocate that money sooner by increasing your retirement investment or adding to your vacation funds.
3. Build Equity Faster – By choosing a 15-year mortgage you are paying down the principal faster and this will result in building equity in your home faster. This will make it easier to refinance down the road, sell sooner or take out a line of credit for a special project. The more of your home value that you own the better off you will be and the closer you are to becoming debt free.
4. Reduce Debt During Retirement – 30 years is a long time and for many people that loan will overlap with the early years of retirement. The downside of this is that you will need to continue to fund your mortgage payment on your retirement income. If you can pay off your home and start thinking about downsizing before retirement you will be in a much more comfortable position.
5. Force Yourself to Make the Payment – Many people opt for the 30-year loan by telling themselves that they will pay extra every month and end up paying the loan off faster anyway. This can be a great choice for some people but it takes discipline that can be challenging. Only you know yourself well enough to know if paying extra is something you will keep up with but the 15-year mortgage will require you to pay the same every month and give you that lower interest rate.
If you are considering refinancing your current loan or your are looking to buy a new home, the loan officers at Title Mortgage can help you run the numbers to determine if a 15-year mortgage makes sense for you. Contact us today!