Use our quick and convenient mortgage calculator to plan for your next housing purchase. Below I hav added some small tips about mortgages to better assist you.
Should you go with a 15 year mortgage or a 30 year mortgage?
30 Year vs. 15 Year Mortgages
Any discussion on mortgages tends to focus on just two key questions. How can you qualify for the most mortgage funds with the lowest overall payment, and how can you get the lowest interest rates? While these two questions are very important, there is an additional question that most people fail to consider when making their decision. Failing to ask this question can cost you a significant amount of money.
The term (or length of repayment) is critical for a couple of different reasons. First, the mortgage term sets the length of the debt obligation. Second, the term also defines the amount of interest you are going to pay over the life of the mortgage. These are both huge issues when it comes to building equity into your new property.
The longer the repayment plan, the more interest you are going to pay over the life of the loan. The trade off is that you have smaller monthly payments each month when you stretch out the length of the loan. While initially it may sound like a good idea to stretch out the payments, doing so can backfire on you down the road.
Most people only focus on the interest rate as the best way to save money on their mortgage. This is often the most recommended approach, but adjusting the length of the loan is actually a better way to save money. If you are able to cut the number of payments in half by going with a shorter term, you will save a lot of money by paying less interest to the lender.
The decision on the repayment terms of your loan is incredibly simple. The best choice is to borrow the money for as little time as possible. In order to consider a 15 year mortgage, you need to determine if you can comfortably afford the higher payments that come with the shorter terms. In general terms, a 15 year mortgage will have payments 20-25% higher than the traditional 30 year loan.