Choosing the Term of Your Mortgage Loan
Most mortgage lenders offer programs of 15 or 30-year mortgages, however mortgage programs can range anywhere from 10 to 30 years. Most of the advertisements you see will be for either 15 or 30-year fixed rate mortgages. The main difference between mortgage programs with different terms is the interest rate and monthly payment.
Many people wonder why their payments will be larger with a 15-year fixed rate mortgage if they have a lower interest rate than with a 30-year fixed rate mortgage. And the answer is quite simple; the amount of time you have to pay back your debt has been cut in half. The increase in monthly payment is usually what deters people from choosing a mortgage with a shorter term. However, if you do choose a shorter term mortgage program you are building equity in your home much faster.
While a 30-year fixed rate mortgage may be the more affordable option to you on a monthly basis, it may be to your benefit to choose a shorter term mortgage if you can. Paying interest for 15 years as opposed to 30 years will save you a lot of money. For instance, if you are taking out a $300,000 loan at 4.25%, a 30-year fixed rate mortgage will cost you $231,000 in interest, whereas a 15-year fixed will only cost approximately $76,000 in interest. That is over $150,000 in interest savings.
There are a lot of choices to make when choosing your mortgage program. Contact us below or at 708-531-8388 to discuss your options.