A 15-year mortgage has some advantages compared to a 30-year mortgage, such as lower total interest paid, a lower interest rate, lower fees, and forced savings. However, it also has some disadvantages, such as higher monthly payments, lower affordability, and less money earmarked for savings. A popular alternative to a 30-year fixed mortgage is a 15-year fixed-rate mortgage. People with a 15-year term pay more per month than those with a term of 30 years.
In return, they are given a lower interest rate. This means that borrowers with a 15-year term pay off their debt in half the time, potentially saving thousands of dollars over the life of their mortgage. It may be worth refinancing your mortgage for 30 to 15 years, but it depends on interest rates and whether it makes sense for you financially. If you have enough money to make additional mortgage payments, Andrews says it's worth considering if you want to invest that money somewhere else that offers a higher return, rather than assuming that the investment involves relatively less risk, since paying your mortgage is usually less risky than other initiatives.
If you have a larger amount of money that you would like to apply to your mortgage and you want to lower your monthly payment, consider reformulating the mortgage. If you want to get a lower interest rate on your mortgage, also make sure you have a high credit score when you apply and consider one of the best mortgage lenders according to the Select classification, such as Rocket Mortgage and SoFi. When it comes to mortgage conditions, 15-year mortgages are perfect for those with the income needed to make higher monthly payments. This is because mortgage loans are amortized and most of the early mortgage payments go to interest and only a small amount to repay the principal. But just because you're not ready to commit to a 15-year mortgage doesn't mean you can't enjoy the benefits of paying your mortgage early.
For example, if you really want to take out a 15-year mortgage, but your current income doesn't allow you to make higher payments, a mortgage lender might suggest that you save more money and look for a higher-paying job to pay them. The Bankrate mortgage calculator can help you calculate the monthly payments for a 30-year mortgage versus a 15-year mortgage so you can get a better idea of how much you can afford to pay for a home based on your income. If a conventional 15- or 30-year mortgage doesn't seem like the best option, then a 20-year fixed-rate mortgage may be a good option. Despite having a lower rate, your monthly payments will almost always cost less with a 30-year mortgage compared to a 15-year mortgage.