For those wanting to enter the ranks of home ownership, getting a mortgage is probably your first step. While most realty and mortgage websites will guide you in the direction of a 30-year-fixed mortgage, for those who would like to speed up the process of gaining equity in their homes, a 15-year-fixed mortgage is an available option. In this piece, we’re going to look at the pros and cons of a 15-year-fixed mortgage.
Because we’d all like to get the bad news out of the way, we’re going to start with the cons of going with a 15-year-fixed mortgage.
Cons of a 15-Year-Fixed Mortgage
Higher Monthly Mortgage Payments
Obviously, if you’re cutting the time it takes to buy a home in half, the money has to come from somewhere. This increase in your mortgage may mean you can’t save or spend nearly as much as you normally would in the meantime.
You Can’t “Afford” As Much House
Most people, even without doing the exact math, could give you a rough idea of the amount of house they could afford based on their income. Those same people will likely be sadly surprised to find that a 15-month-fixed mortgage provides much less wiggle room in their budget as well as much less house.
Because you’re paying off your house twice as fast with less interest, you may end up missing out on as many mortgage interest tax deduction dollars.
Now that the bad taste of the medicine is out of the way, let’s look at the advantages of a 15-year-fixed mortgage.
Pros of a 15-Year-Fixed Mortgage
Lower Interest Rates
As lenders aren’t as nearly as susceptible to risks on a 15-year-fixed mortgage, this usually makes interest rates lower. Lower interest rates over the course of your mortgage plan means that you’ll actually pay less in the long run.
You’ll Build Up Equity Faster
As you pay a higher mortgage payment every month, you’re on your way to bonafide home ownership that much faster. While these higher mortgage payments may be harder to weather for those 15 years, at the end of it, you’ll own your home outright and will be able to quickly grow your savings.
The ultimate decision on which type of mortgage to go with depends on many different factors. Whichever decision you go with, know that the home building process is one less thing to worry about with help from your friends at Perry Hood Properties.