Pros and Cons of a 15-Year Mortgage

With interest rates so low, there’s been a lot of talk about 15-year mortgages. How are they different from more traditional 30-year mortgages? What are the pros and cons of a 15-year mortgage? Here’s what you need to know:

Pros of a 15-Year Mortgage
There are several pros to securing a 15-year mortgage, including:

Paying Less in Total Interest
Because a 15-year mortgage will be paid off in half the time of a 30-year mortgage, homeowners can expect to pay less in total interest.

Lower Interest Rate
On top of paying less in interest over time, homeowners with 15-year mortgages are likelier to have a lower interest rate. While credit history and other factors still play a role in determining interest rates, banks generally feel more secure about lending out less risky short-term loans. This can result in better interest rates!

Forced Savings
What would you do with the savings you gained from having a 15-year mortgage? Many people say that they would put that money into investments like stocks. While that’s definitely an option, putting that money back into the house at the end of the loan term can significantly increase the value of the home!

Cons of a 15-Year Mortgage
Although there are a handful of pros to consider, the cons of having a 15-year mortgage also require some heavy consideration:

Higher Monthly Payments
A 15-year mortgage has significantly higher monthly payments – unless you saved up a ton of money for the down payment, that is. How secure are you financially, and are you fairly confident in the stability of your job, especially during a recession? If these questions give you pause, you may want to reconsider the 15-year loan.

Less Affordability
Because of income limits, you may find yourself stuck looking at more modest homes than you would be looking at with a standard 30-year loan. If the homes within your budget don’t align with your goals, you may want to consider a 30-year mortgage instead.

Savings and Retirement Implications
As I previously mentioned, 15-year mortgages tend to cost a bundle each month. Unless you have a high income, it may be difficult to put money into savings and retirement. Remember, you may not have the same job 10 years from now, so you have to be pretty sure of your earning capabilities over time. Unless you are totally confident in your financial situation, it may be better to get a 30-year mortgage.

Are you interested in buying or selling a home? Contact us today at 713-364-5883 or info@angelfultzrealty.com.