Once you’re prepared for your mortgage application, you’ll want to determine the life of the loan, aka the term. That’s how long it’ll take you to pay off the loan if you make the minimum scheduled payments.
So let’s talk about 15- and 30-year fixed-rate mortgages. Fixed-rate mortgages are exactly what they sound like: your interest rate is locked in for the duration of the loan. According to Freddie Mac, nearly 90% of homebuyers select 30-year fixed-rate mortgages. However, depending on your budget, spending priorities and financial goals, a 15-year mortgage could be the best fit for you.
Obviously, there’s a 15-year difference between these terms—but it’s a big difference that affects other parts of the loan.
15-Year Mortgages
If you’re wondering why 15-year mortgages aren’t as common, there’s an easy answer: they’re an ambitious, aggressive path to mortgage-free homeownership that not everyone can (1) qualify for and (2) commit to pulling off.
The Pros
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- Lower total interest costs
- Faster equity growth
- Lower overall cost (aka, LOTS of savings)
- Your home is yours in just 15 years!
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The Cons
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- Higher monthly payments
- Refinancing for a better rate can reset the clock
- More difficult to qualify for
- Less wiggle room when UNexpected expenses pop up
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If you’re a high-income borrower and/or your goal is to pay off your home as soon as possible with as little interest as possible, it’s worth talking to your financial advisor and one of our top-notch loan officers for guidance.
30-Year Mortgages
Paying off your mortgage in half of the standard time is awesome in theory, but it’s not attainable or realistic for most homebuyers. That’s where the 30-year mortgage comes in. This tried-and-true term may not be as flashy on paper, but the UNdeniable affordability it offers keeps it the most popular option for most people.
The Pros
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- Lower monthly payments
- More flexibility in your budget
- Refinancing can reduce your loan term
- Bonus principal payments can, too!
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The Cons
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- Higher interest rates
- Longer loan term = more time for interest to accrue
- Higher total cost
- Building equity takes longer
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To determine which type of mortgage is best for you, reach out to our trusted loan officers today.
This blog is intended for educational purposes only. For details about specific products or services, see credit union for details. For questions about investments, please consult your financial advisor.