With so many mortgage options available, it pays to know the benefits of one loan program over another. For example, a 15-year mortgage is a dream for buyers who can afford a higher monthly payment and want to pay off their mortgage in about half the time.
What is a 15-year Mortgage?
A 15-year mortgage is a mortgage that is completely paid off in 15 years if you make all the payments each month exactly as it’s scheduled. It typically is what we call a fixed-rate, which means the rate doesn’t change over the life of the loan. Being fixed keeps the principal and interest the same and the only part that may fluctuate is the taxes and insurance costs.
The great thing about a 15-year mortgage is that the rate is typically a lower rate than most other mortgage options. This allows you to build your home equity faster because you pay down the principal balance quicker. It also means that you will own your home free and clear a lot sooner, which is a very attractive benefit for most homeowners.
Despite all the great benefits of building equity and owning your home sooner, there are some cons you need to be aware of before you commit to a 15-year mortgage. While the rate is lower for a 15-year mortgage, the monthly payment is typically higher. You’ll want to make sure you have a stable income when you take on this loan. Also, with a 15-year mortgage, you commit yourself to making larger payments each month and have a smaller amount of money available for emergencies.
With rates at all-time lows, now might be the perfect time to consider a 15-year mortgage. Talk with your loan officer today to learn more about your different home loan options and see what makes the most sense for your financial scenario.