Many things go through home buyer’s minds when they start to consider purchasing their dream home. While deciding what paint color will go in the new kitchen is a decision itself, determining if a 15-year or 30-year mortgage is right for you should be taken into consideration heavily. The simple thought that a 30-year loan has lower payments should not be the lead contributing factor in your decision. There are many other aspects to contemplate.
A look into a 15-year loan
Oftentimes, homeowners shy away from just the thought of a 15-year mortgage. The idea of higher payments scares more off, making the popular 30-year mortgage more attractive. However, this loan is something to consider if you are looking to save big down the road. By obtaining a lower interest rate with a 15-year loan, the interest savings will surely add up. In short, your payments each month will be larger, but you will be paying less interest. If you come to conclusion that you are financially stable to pay these higher payments, make sure you will be able to do so later on, as well. Be sure that you are comfortable in your current job situation for years to come. Think of other major monthly payments that might sneak up on you down the line. An unwavering income is needed in order to pay this money back faster than a 30-year loan.
A look into a 30-year loan
To state the obvious, you will have lower monthly payments with a 30-year loan. This traditional mortgage could help home buyers purchase a more expensive home. With lower payments, home buyers also have the opportunity to save for other big financial goals. Another apparent benefit is that when you lock in a good rate, you can sit comfortably with it for a long time. However, be aware that you will pay off your home in double the amount of time that it would take if you got a 15-year mortgage. The interest rates with a 30-year loan will be higher because of the higher risk they present to lenders.
There are benefits for both mortgages, depending on your financial situation and current mortgage rates. Still not sure which term is best for you? Don’t be hesitant to ask questions to a licensed loan officer. They will give you a better understanding about where the market is today to help with your decision making.