With interest rates at historic lows, more homebuyers are interested in 15-year mortgages than ever. Who wouldn’t want to seize the opportunity to save a boatload of money over time? The decision to choose a 15-year mortgage is a big one, though, and it’s important to consider the advantages and disadvantages. No worries, though – we’ve got you!
The Advantages of a 15-Year Mortgage
First, let’s talk positives of a 15-year mortgage, because there are definitely plenty! The obvious benefit is that homebuyers can expect to pay less in interest over time. You can use the “savings” at the end of the loan on whatever you’d like – a new car, a fancy vacation, maybe even a down payment on a new home – but the best thing to do might be to reinvest your savings back into the house in the form of updates and renovations. Not only will updates make you feel better about your home, they will increase your property’s value, too.
Another benefit? Your interest rate could be even lower with a 15-year mortgage. This is because if you qualify for a 15-year loan, the bank may consider you to be less of a financial liability. Of course, there is no guarantee you will receive a reduced interest rate – the bank will still consider factors like your credit and job history – but a potential interest rate reduction is definitely an advantage worth considering!
The Disadvantages of a 15-Year Mortgage
Think hard on the disadvantages of a 15-year home loan, because there are a few pretty significant ones. First, you may find yourself looking at more modest homes than you normally would. If your dream to own a certain type of home is washed away all because of the high monthly cost of a 15-year mortgage, it’s time to consider a 30-year loan – or altering your expectations.
Higher monthly mortgage payments may also affect your non-home goals. Depending on your income, you may lose out on the opportunity to put money towards retirement, vacations, college, or other important goals. Also keep in mind that, as many have unfortunately found out due to the coronavirus recession, your current salary may not be guaranteed. If you live a more peaceful life knowing you have a little wiggle room in your budget, a 15-year budget may not be right for you unless you have a hefty chunk of change for a down payment.
As always, if you have questions about your options, give us a shout! Choosing the right home loan is difficult and you don’t have to do it alone. Happy home hunting!