Your home is one of the biggest purchases you'll ever make (if not the biggest). If you are like most people, you'll need a mortgage to be able to buy it.
These days, there are a lot of different types of mortgage loans available. Should you get a traditional 30-year loan, or a faster 15-year mortgage?
As it turns out, there are actually pros and cons to both options. Before you make a decision, consider these points:
- Pro: A 30-year mortgage offers flexibility. Your monthly mortgage payments are lower, because the total amount is spread out over more time. If you become ill, lose your job, or have some other financial trouble, you are less likely to get yourself into trouble with your mortgage.
- Pro: If you want to pay your mortgage off early, you can choose to pay extra each month toward your loan principal.
- Con: A 30-year mortgage comes with a higher interest rate. That's because the bank is taking a longer risk on you. So even if you do pay off your mortgage early, you will still be paying more in interest.
- Pro: A 15-year mortgage will save you money with a lower interest rate. Borrowing money for a shorter time with a lower interest rate will save you thousands of dollars in interest payments over the life of the loan.
- Pro: A 15-year mortgage forces you to pay off your loan earlier. If you can afford the higher monthly payments but don't have the self-discipline to make extra payments yourself, this may be the right option for you.
- Con: A 15-year mortgage offers much less flexibility. If you do run into financial trouble in the future, you can't just decide to pay less and turn it into a 30-year mortgage.
So, how do you decide which mortgage is right for you?
Get pre-approved for a mortgage before you start shopping for your new home. Talk to a loan officer - find out what the payments will be for both a 30-year and a 15-year mortgage, and see how well they fit into your maximum budget.
Then, when you're ready to start shopping for a house, call me and make an appointment. I look forward to helping you find your dream home!