3 Reasons To Get A 15 Year Mortgage

Filed in Mortgage Rates, mortgages on Oct.01, 2011

Lately, I’ve been it the process of buying a new home and as part of that I’ve consider different types of mortgage programs that would best fit my situation. One program I’ve been leaning towards a lot is the 15 year fixed mortgage rather than the traditional 30 year fixed mortgage. So in this article I’m going to list 3 major benefits to getting a 15 year mortgage.

Less Interest

First off, when we compare a 15 year mortgage vs 30 year mortgage we will pay far less in interest with this type of loan. In fact I recently ran a comparison of a $120,000 mortgage and found that by going with the 15 year mortgage I would save over $55,000 in interest. On top of that I also found that lower term mortgage such as the 15 year mortgage will carry lower interest rates than a 30 year mortgage.

Less Interest Per Payment

The next reason to consider is the payments. Obviously, with a 15 year mortgage the payment will be higher than a 30 year mortgage however with a 15 year mortgage you will pay far less in interest. In fact with a $120,000 loan more than half of the payment will go towards the principle portion of the loan, which is great.

While with a 30 year fixed mortgage nearly 80% or more of the payment will go towards the interest in the first 5 to 10 years of the loan. In fact it will typically take till year 15 of a 30 year loan to pay just half the payment towards the principle.

Pays Down Faster

Finally, the last big reason to consider a 15 year mortgage is because it pays down a whole lot faster. In fact if you would make a $1000 payment on a $120,000 mortgage you would pay off the 15 year mortgage nearly a half year sooner even though you are paying off the same amount of money. The reason for this is because lower term mortgages have smaller interest rates. In fact the current rate on a 30 year fixed mortgage is around 4.25% while a 15 year fixed is around a 3.75%.

One Final Thought To Consider

In the end a 15 year mortgage is one of the best mortgage deals around so take advantage of it if you can. However I also need to stress one warning with the 15 year mortgage, if you can’t afford the payment that comes with it I suggest you go with a 30 year mortgage instead. Having a payment you can’t afford is to big of a risk to bare because it could cost you your house if you’re not careful.

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