With low interest rates still prevailing through the middle of the current decade, many home buyers want to know about the advantages (and disadvantages!) of 15-year mortgages.
Do you know the ins and outs of this popular investment tool? Are “fifteens” always a good idea? How can you figure out whether to opt for a 15-year mortgage or the more traditional 30-year note? These and other questions are addressed in a recent Bankrate article that hits on all the major attributes of 15-year mortgages. Here’s the gist of what the experts are saying about this exciting option:
- The 15-year fixed-rate mortgage is a fast way to build equity in your home, which is the primary reason many consumers choose it.
- Just like the 30-year mortgage, the 15 offers stable payments and interest rates for the duration of the contract.
- While principal and interest do remain static for the 15 years, there could be a change in the amounts paid toward homeowner’s insurance and property taxes, which could slightly change month-to-month payment amounts, either up or down.
- Most borrowers who choose the 15-year mortgage point to the “fixed” features of principal and interest payments, as well as the rapid rate at which they are able to build equity as the key advantages.
- On average, the interest rate you’ll pay on a 15-year mortgage is lower than what you’d pay on a 30-year note.
- Because the rate is fixed, those who buy a home on the 15-year plan will have to refinance in order to take advantage of lower interest rates, if and when they occur.
- Another rather obvious disadvantage of the 15-year mortgage is that payments must, due to laws of simple mathematics, be higher than they are with a 30-year mortgage agreement.
Every buyer is different, and economic conditions seem to change with the weather. So make sure to discuss the pros and cons of a 15-year mortgage with your banker and real estate professionals before deciding to go this route. That said, the 15 has recently enjoyed a surge of popularity for many reasons, and it is a great way to ramp up your equity in a short amount of time. It’s a good idea to consider all the options before setting out on the journey of home ownership.