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15 or 30 Year Mortgage

The entire process of searching for and buying your dream house can be an arduous task involving many choices. One big choice is whether to obtain a 15-year mortgage or a 30-year mortgage. If you want to build equity fast a 15-year mortgage is your choice but be prepared for higher monthly payments. A 30-year mortgage requires lower payments, but will cost more in the long run. It can be a difficult decision.

With fifteen-year mortgages buyers will own their homes sooner. Although their monthly payments are higher they build equity more quickly because a higher percentage of each payment goes toward the principal rather than the interest. Overall, you pay less interest.

Some borrowers like the benefit of a lower rate from a 15-year mortgage as well as the ability to pay the debt off faster. However some borrowers who are on a tight budget, focusing on the monthly payment, will look at the 30.

Lately, financial planners have been advising consumers to consider all of the factors involved when deciding on a loan. Rather than concentrating soley on which has higher payments and which has lower rates, they are urged to consider how the loan will fit into their overall financial plan.

Building equity as quickly as possible is tempting but consumers should approach that plan with caution. If the higher payment leaves you with very little money to save each month, any sort of an emergency could place you in financial difficulty. People without sufficient cash reserves should therefore consider the 30 year loan. And there is the option of making extra payments whenever possible.

As with any decision, it is important to gather the facts and balance the pros vs. the cons. Here are more resources:

Selecting a mortgage can be perplexing, frustrating, and time-consuming. Mortgage lenders offer a variety of loan packages under different names with different interest rates, up-front costs, and fine print terms, all of which can change frequently. You need a lot of information to get a mortgage that best fits your needs at a competitive price.
Read more at North Carolina State University

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