If you need any indication that the housing market is hopping, 55.5% of homes sold are above the initial asking price. These homes are also selling quickly, only lasting on the market an average of 15 days, that’s selling 20 days faster than just a year ago.
So, when you’re ready to buy a home, you have to have a plan. Are you approved for a mortgage? What terms do you hope to have on the mortgage?
Of course, buying a house means a whole lot of capital leaving your hands. You might be wondering about what type of mortgage will be your best fit?
While most people do a 30-year mortgage, you also have an option for a 15-year mortgage. What are the benefits of a 15-year mortgage, and why should you consider this option?
Let’s learn more about 15-year mortgages and how they might be an option to consider.
30-Year Mortgage vs. a 15-Year Mortgage
When you discuss years in a mortgage, it simply means the terms that tell you how long you’ll be paying towards total homeownership. So, when you have a 30-year mortgage, it takes 30 years to pay it off. A 15-year means that after 15 years you’d have the house paid off.
So, why would anyone not choose a 15-year mortgage if it means you can have your house paid off sooner? Well, it also changes some other terms of the mortgage as well.
In a 30-year mortgage, it’s likely you’ll have a slightly higher interest rate, but your payments are spread out over 30 years. This makes the payments lower. So, while you’ll pay more in interest because of the extended years, a 30-year mortgage will provide a smaller payment.
Benefits of a 15-Year Mortgage
Many mortgage companies will offer a lower interest rate on a 15-year mortgage than a 30-year. Because you have a lower rate and you’re paying it off sooner, it can be real savings for you in the long run.
For example, let’s say you’re getting a $240,000 dollar mortgage. With a .5% lower interest rate, the 15-year mortgage saves the homebuyer over $100,000 in interest over the life of the mortgage.
The thing to know is that with a 15-year term, you have a higher monthly payment so that you can pay the house off sooner. So, in the same scenario as above, the homebuyer would pay around $600 more every month on their mortgage.
As a homebuyer, you have to weigh whether you can afford the higher monthly payment in return for paying less in interest over time.
Understanding a 15-Year Mortgage
As you talk with mortgage lenders to consider your home mortgage costs, take the time to compare a 30-year and 15-year mortgage. If you can afford a little more in your monthly payment, it will offer you significant savings in the long run.
If you want to learn more about your mortgage options or get more information on a 15-year mortgage, we can help. Contact us today at JTS & Co. to get one step closer to your dream of homeownership.