Mortgages > Purchase
15 Year Fixed loan / 15 year mortgage
Having a 15 year fixed loan could be heavy at times! What I mean is the payments are considerably higher than a traditional 30 year fixed loan. A 15 year fixed loan is amortized over 180 months with final payment due at maturity.
Ever wonder why 15 year loan rates are lower or favorable than 30 year loans?
Rates traditionally are much more favorable for a shorter term loan like the 15 year fixed loan because lenders or banks acquire much less of a credit risk. Banks or lenders have a lower risk assessment with a 15 year loan in their portfolios because of the time the loan gets paid off till maturity. Would you want to lend your own money out for a longer or shorter period of time? That’s why rates are favorable the lower the mortgage terms. Lenders will give you a rate advantage on the 15 year fixed loan since it will be paid of earlier than the 30 year loan or even the 40 year loan. When you compare rates for loans you will generally see much lower mortgage rates for shorter mortgage loan terms.
Assess your financial status before refinancing or purchasing a home
Make sure you can afford or reasonable predict your financial future. When you apply for a 15 year fixed loan the payment in present terms can seem “do-able”, but when crunch time happens, or a catastrophic even happens you might not be able to afford it any more. Generally, the quicker you can pay off your mortgage the better you are (the less interest you pay the better). Be careful trying to go for the “gusto” while shooting for the stars of paying off the mortgage too soon. Don’t get caught up with walking the fine line of being able to meet all you expense obligations.
When you find that a 15 year fixed loan is more than you can handle you can/should be able to refinance into a much longer term loan with much trouble. Be cautious using this as an excuse to get into a 15 year fixed mortgage loan. Each time you have to refinance it usually costs about $2,500.00 on an average home loan of $190,000, which in turn reverses much of the saving in interest payments or loan term you were trying to save.
When you shop for a mortgage loan such as a 15 year fixed loan try comparing these types as well:
15 year fixed loan vs. 30 year mortgage
15 year fixed loan vs. 10 year mortgage
15 year fixed loan vs. 3/1 ARM mortgage
15 year fixed loan vs. 5/1 ARM mortgage
15 year fixed loan vs. 7/1 ARM mortgage
Make sure you compare the total payments that fit into your budget. Remember you can always pay more towards your principle with each payment with out taking on an obligation to pay it every month. Pay it when you can! Make sure you compare all the 15 year fixed loan or 15 year mortgage against all other options.
• Apply now for a home loan!
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
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