Is a 15-Year Mortgage Right for YOU?

So, you are ready to buy a house. You have found your dream house, your down payment is ready and you already got a pre-approval. But the problem is, you don’t have an idea what type of loan you want.

If the thought of high interest rates make you cringe and not knowing how much you’ll pay each month makes you anxious, you are not alone. If you are looking for protection against rate fluctuation, but you can handle a high monthly payment, then a 15-year mortgage might be right for you.

A huge percentage of American homebuyers choose the ease and security that comes with a 15-year mortgage. In this type of loan, payments are amortized over the duration of the loan. This means that your monthly payment will be the same every month for 15 years; thus, giving borrowers an assurance of a fixed interest rate.

However, this also translates to a higher monthly payment. This is because the principal must be paid off faster; thus, requiring buyers to cough up a larger monthly payment. And since you are paying the principal faster, you’ll be saving thousands of dollars on interest.

Choosing a 15-year mortgage may help you save money on interest and pay off your loan faster, but you may not be able to set aside money each month for your kid’s college tuition or your retirement. Additionally, with most of your money allotted for mortgage payment, it may prevent you from investing in things such as bonds, stocks and interest-bearing accounts.

Bottom line

15-year mortgage is best for you, if you:

  • Have a stable job and income
  • Are comfortable making high payments each month
  • Want to pay off mortgage in a relatively shorter period of time
  • Want to save lots of money on interest
  • Want to build equity faster