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