Reasons to consider a 15-year fixed-rate mortgage

Man, woman and two children packing boxes on moving day.

When you're buying a home, whether it's your first home or your fourth, choosing a mortgage that fits your needs and budget can be tough. While there are pros and cons to any kind of mortgage, a 15-year fixed-rate mortgage, instead of an adjustable rate mortgage or even a longer term fixed-rate loan, might just be the right choice for you. Here are some good reasons to consider a 15-year loan:

Fixed principal and interest payments

When interest rates are low, it’s usually a good time to purchase or refinance a home. If you choose a fixed-rate mortgage, the amount of interest and principal you pay monthly won’t increase if interest rates make a major jump during the term of your loan. With an adjustable rate mortgage (ARM), your loan rate could adjust up or down depending on market changes.

Save more over the long term

A shorter loan term of 15 years means higher monthly payments, but not necessarily double what you might pay with a 30-year loan, for instance. Compare the terms of a 15-year mortgage versus a 30-year mortgage with a mortgage calculator to see the difference in costs. With a 15-year home loan, you’re paying far less in interest over the life of the loan. Generally, 15-year mortgage rates are lower than a 30-year loans. That’s because there’s less risk on the lender you won’t pay off the loan. Depending on the size of your mortgage, you could save money over 15 years compared to 30 years.

Faster mortgage payoff

Another benefit of a 15-year loan is a faster principal payoff. In addition, you’ll build equity in your home quicker than you would with other options, like a 30-year fixed-rate mortgage. That shorter payoff period could mean more flexibility with how you spend or invest your money later, especially if you have a big financial change looming in your future, such as retirement or college tuition. Plus, you’ll be free of a major source of debt sooner.

If you think your budget allows for a larger monthly payment, contact us to see if a 15-year fixed-rate mortgage makes sense for you.

The advice provided is for informational purposes only.

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