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15-Year Fixed

15 Year Mortgages: A Buyer’s Guide

15 year mortgage rates fifteen year mortgages home buying

With the pandemic still prevalent and interest rates near all-time lows, now is a great time to consider whether a 15 year mortgage would be best for you. While most people see 30-year mortgages as the standard, you have big dreams of owning your home outright in half the time. Now the question is, “Should I?” 

15 Year Mortgage Rates: What Do You Save?

The ability to pay off a home in half the usual term is the most self-evident benefit of a 15-year mortgage. But perhaps the most significant benefit is saving thousands in interest over the life of the loan. Not only because the term is shorter but 15-year interest rates have always been lower than 30-year rates. 

Big Payments Make Me Nervous

Knowing your mortgage is going to be paid off in such a relatively short amount of time gives homeowners a sense of independence, financial security, and accomplishment. What we would not want it to give you is a sense of uneasiness. 

The higher monthly payment will leave less cushion in the monthly budget than a 30-year mortgage otherwise would. Especially if you are on a fixed budget. This is, however, a concern that can be resolved. Many financial experts recommend maintaining three to six months’ worth of mortgage payments in savings. If your budget fluctuates or a job loss is suffered, you can count on being able to make those 15 year mortgage payments for at least those three to six months. 

Another possible solution is the size of your down payment. Some people choose low down payment options simply because it feels more comfortable than bringing a big chunk of change to closing day. But if you have the option to put 10% or 20% down rather than 5% you can make a significant dent in the monthly payment. The added benefit of a larger down payment is saving even more in interest over the life of the loan. 

To be or not to be

When choosing which type of mortgage is best for you it is prudent to evaluate your financial stability. How accessible are your future goals, while keeping in mind the unforeseen? In other words, find your comfort zone. To do so you might ask yourself the following questions.

  1. Are there any debts or portions of my monthly budget I can eliminate in order to reap the benefits of a higher 15 year mortgage payment?
  2. Is the money ultimately saved going to offset the effects of a higher monthly payment when it comes to achieving financial goals? 
  3. Where do you like to put your money? Instead of owning your home outright sooner would you rather invest the extra money every month? 
  4. How secure or stable is your income? What would happen if you became unemployed or made less money in the future? Do you have a financial backup plan?

Your Home Wasn’t Built in a Day 

Remember that your home wasn’t built in a day and neither does your mortgage have to be. These are questions for you to ponder as you prepare to search for a home. Crunch the budget, use an affordability calculator to find a good price range, and then talk to a real-life mortgage banker. Because can help you sort through the rest.