Comparisons Of 15 Year Fixed Rate Versus 30 Year Fixed Rate Mortgage
This BLOG On Comparison Of 15 Year Fixed Rate Versus 30 Year Fixed Rate Mortgage Was Updated On May 15, 2017
Of the two mortgage term options is the 15 year fixed rate mortgage or 30 year fixed rate mortgage period better?
- There are benefits of 15 year fixed rate versus 30 year fixed rate mortgage.
- These are the two common periods over which people choose to pay their mortgages in, so what is the difference?
- Obviously, the longer you take to pay, the less your monthly repayments will be, but what are the pros and cons of repaying a loan over a shorter or longer period?
Lower Mortgage Rates On 15 Year Fixed Rate Versus 30 Year Fixed Rate Mortgage
Homeowners can choose a 30 year fixed mortgage rate versus 15 year fixed mortgage rate and make extra monthly payments and get the loan paid in full in 15 years. However, mortgage rates on 15 year term loans are generally lower than 30 year fixed rate mortgages. However, mortgages usually have the advantage of lower interest rates and the interest payments are usually tax-deductible for a normal family home.
Here are some pros and cons of each.
30 Year Fixed Rate Mortgage Loans
- The vast majority of mortgage terms are 30 year fixed rate mortgage.
- This generally means that it will take 30 years to repay the loan.
- It does not mean that you pay the same interest rate for these 30 years, because 30-year adjustable-rate mortgages can be arranged with a lower rate for the first 5, 7 or 10 years, say.
- The rate is then adjusted to the standard at the time the fixed rate period ends – that could be a higher or lower rate.
The 15 Year Mortgage Term
Some people prefer to take a mortgage over 15 years.
- By doing this they will make higher monthly repayments, but will pay less interest over the period of the loan.
- They will also own their home outright in half the time.
- Homeowners also build equity in their home faster, so they will find it easier to refinance if they wish to, or make more when they sell it to upgrade.
With a 15 year term, the mortgage will be amortized over the entire 15 years with a fixed rate of interest.
- Homeowners will know exactly what they are paying without the worry of rates increasing above an affordable level.
- Homeowners can refinance their 15 year mortgage to 30 year mortgages if they are struggling to make their monthly mortgage payments.
Among the advantages of a fixed rate 15 year mortgage are:
- Same payment every month for the entire 15 year mortgage period
- Home paid for sooner
- Quicker increase in equity
- Same mortgage available to 50 year olds as for 20 year olds depending upon type of job
- Less overall interest paid
Which Is Best For Homeowner?
The above mortgage term options may or may not fits the homeowners needs, depending upon their personal financial situation.
- A 30 year term might enable homeowners to buy a larger home
- Or might even be necessary to buy a home at all!
The main differences between a 15 or 30 year fixed rate mortgage are that
- a) You can buy a larger home or pay less each month over 30 years, but
- b) you can own your home 15 years sooner over a 15 year mortgage term.
- There are alternative mortgage term options but these are the most common.