While many home borrowers choose the 30-year fixed mortgage, there are also those who prefer its shorter version, the 15-year fixed loan. If you don’t want to get stuck paying the loan for 30 years, getting the 15-year term is advisable. This allows you to build equity faster, as well as let you own the home quickly.
A 15-year fixed loan has interest rates and monthly payments that will stay the same for 15 years (the time you are expected to pay the entire mortgage). This usually carries a low rate but has high monthly payments as you are paying the loan for a shorter period. If you’re thinking of getting this loan, it is important to be aware of what you are getting yourself into.
Stability and peace of mind
Unlike adjustable-rate mortgages, there won’t be any changes in your rates and monthly payment for 15 years. This gives you peace of mind and lets you manage your budget better, as you already know what your mortgage payments will be each month.
Less money spent on interest
A 15-year fixed loan is less risky and cheaper for lenders to fund. This is why it usually comes with lower interest rates than a 30-year loan. This also means lower total interest cost and paying off the principal faster, according to mortgage lenders in Tempe.
The risk with higher payments
The main downside of this mortgage is that it comes with an expensive monthly payment. If there is a significant change in your financial situation, you may experience difficulty in paying the loan. Note that missed mortgage payments can negatively affect your credit score.
Limitation on loan amount
The higher monthly payment of a 15-year fixed loan may also limit the overall price of the property you can afford. This means that you can only buy a more modest or a smaller house than you would be able to with a 30-year loan.
A 15-year fixed-rate loan always makes sense, as it can help you save more money in the long run. It is best to examine the pros and cons of this loan before making a decision. You can also consult a reliable lender to find out if you can qualify for this loan term.