15-Year or 30-Year? Which Mortgage Term is Right for You?Posted by Ansley Atlanta 02/05/2019
A key part of the home buying process is deciding which mortgage term is right for you. Opting for a 15-year mortgage term instead of the traditional 30-year term seems like a smart move, right? Not necessarily. Going with a shorter mortgage term does have some benefits. However, there are certain situations where a longer mortgage term makes sense. If you’re on the fence about which type of mortgage you should choose, take a look at a few basic pros and cons below.
Pro: You’ll pay a lot less interest over the life of the loan. You’ll be borrowing money for less time, and usually at a lower interest rate.
Con: You’ll have higher monthly payments than with a 30-year loan for the same amount. If the higher payments put a strain on your budget, you might have to settle for a lower-priced home or a look at a longer loan term.
Pro: Spread out over a longer time, these loans have a lower monthly payment, which could help you qualify for buying a higher-priced home.
Con: After a few years, you’ll have less equity built up that if you’d been making the higher payments of a 15-year loan. You’ll also end up paying more interest over time.
When you’re comparing mortgage terms, you need to look beyond the interest and see the bigger financial picture. You’ll be able to build equity in your home faster by paying it off in 15 years; but this also means you might pay a price in terms of sacrificing your other financial goals. Going with the longer term loan gives you more freedom when it comes to saving and investing; but in this case, you may get tired of carrying the debt burden. Ultimately, it comes down to what works best for your budget and your peace of mind.
Please contact us if you have any questions about the home buying process – we’re here to help!