15 Year Term, Fast-Payoff Mortgage

2007-03-08 10:33:40

( Financial )



When you shop for a mortgage you would surely consider the length of time that you will have to make payments in your mortgage loan. You would also have to decide whether to take adjustable rate mortgage or fixed-rate mortgage.

Among the fixed-rate mortgage options that lenders offer are the relatively new 40 year mortgage, the traditional 30 year mortgage and the fast-paying 15 year term mortgage. All these mortgages offer the security of knowing that your monthly principal and interest payments will never go up.

If you choose a 15 year term mortgage, you can usually get a lower interest rate. The shorter the term of the loan, the lower will be the interest rate and your monthly payments. A 15 year term loan saves more than half the interest paid over the course of a 30 year loan.

Remember that your payments in a 15 year term mortgage are amortized over 180 months. In this type of mortgage, your monthly payment may be higher, but you pay off the interest and principal faster. Thus, you end up paying less than longer term loans.

Since you pay interest and principal in a 15 year term loan, you accumulate home equity sooner than a 30 year or 40 year mortgage. With bigger equity, you will have better financial flexibility to get a more expensive house or finance your child’s college education or put more money into your retirement fund.

If you have already taken out a 30 year mortgage, you can still avail the advantages of a 15 year term mortgage through refinancing. This is particularly attractive when the prevailing mortgage interest rates are lower.

Because 15 year term results in higher monthly payments, you must check with your lender if you can qualify for this loan. Be aware also that a shorter loan term will lose the tax deductibility on the mortgage interest payments faster.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.