A shorter term, such as a 15-year mortgage, combined with a potentially lower interest rate means you're likely to pay significantly lower total interest compared to a longer term of 30 years. This illustrates the significant interest savings of choosing a shorter mortgage term. The decision between a 30-year or a 15-year mortgage will affect your finances for decades to come, so be sure to analyze the numbers before deciding which one is best. If your goal is to pay off your mortgage sooner and be able to pay higher monthly payments, a 15-year loan could be a best option.
The lower monthly payment on a 30-year loan, on the other hand, may allow you to buy more home or free up funds for other financial goals. The calculation of the back of the envelope is how much (or if) the return on foreign investment, minus the capital gains tax due, exceeds the mortgage interest rate after accounting for the deduction of mortgage interest. A percentage point may not seem like a big difference, but keep in mind that with a 30-year mortgage, you'll have to pay that difference twice as long as you would with a 15-year mortgage. If you don't have access to a specialized 15- or 30-year mortgage calculator, don't worry.
It's easy to use a regular mortgage calculator to compare the payments you can expect from these two types. of loans. While a 30-year mortgage can make your monthly payments more affordable, a 15-year mortgage generally costs less in the long run. Over the past few years, the average interest rate for a 30-year mortgage has been between 0.5 and 1% higher than that of a 15-year mortgage.
You can make the right mortgage decision by choosing a 15-year fixed-rate mortgage from the start. Talk to the mortgage loan specialists at Churchill Mortgage, from RamseyTrusted, to get a 15-year mortgage that fits your budget so you can pay off your home quickly. If you already have a 30-year fixed-rate mortgage and are interested in refinancing a 15-year mortgage, there are a couple of key points to consider. This is because mortgage loans are amortized and most of the early mortgage payments go to interest and only a small amount to amortize principal.
With a 15-year mortgage, you'll be free of mortgage debt in half the time as with a traditional 30-year mortgage. If with a 15-year mortgage you exceed that 25% limit, you might be tempted to choose a 30-year mortgage for reduce the monthly payment. If you have a solid idea of these factors, you can evaluate whether it's more feasible for you to continue making mortgage payments as scheduled or to cancel the mortgage and invest the funds. While the 30-year mortgage is the most popular, a 15-year mortgage offers some key advantages if you can afford it.