15 and 30 year Mortgage Rates15- and 30-year mortgage interest rates
If you choose between a 15-year mortgage and a 30-year mortgage, you should consider all the advantages and disadvantages before making your choice.
Generally, the main reasons most home buyers take out a 30-year mortgage are because they can't buy a higher month's mortgage (or think they can't buy it). However, if you can find a way to make a 15-year mortgage interest work within your budget, it could actually pay off in the long run.
You' d own your home earlier and end up paying less for it, and you' d probably also take out your mortgage at a lower interest on it. Suppose you want to buy a home for $300,000. When you take out a 30-year fixed-rate mortgage at 6.5%, you would be paying about $1900 a month. What's more, if you took out a 30-year fixed-rate mortgage at 6.5%, you would be paying about $1900 a month. What's more, you'd be paying about $1,500 a week a year.
At the end you spend $300,000 on your home and $382,633 on interest. With a 15-year fixed-rate mortgage at 6. 0%, if you purchased the same home, your projected one-month mortgage would be approximately $2,532. That' $300,000 on the place and only $155,682 on the interest. That' $226,951 less than the 30-year mortgage!
This " more " could be spent on investments, training of your children, renovation of the home, etc. It is up to you to determine whether the additionally deposited amount is valuable for the long-term payout. You just sacrifice every month for 15 years, and then... no more payoffs. Now, the most apparent drawback is that the monetary amount is higher.
A further disadvantage: by payment of less interest you receive less reduction of taxes. Whilst the appeal of your home to pay for itself in 15 years may sound thrilling, for many it is a wish. But when we began cracking the numbers, we realised that we were daydreaming and daydreaming big.
One additional annual fee was our way of paying. E.g. if you use the example above, a $300,000, 30-year fixed-rate mortgage at 6. 5% and if we just add $200 extras each monthý( 0r $2400 per year) towards the principal, we could maybe be paying off our mortgage nearly 7 years earlier and saving over $100,000 in interest.
We have the advantage of being able to repay the mortgage earlier, without being bound to a higher amount per month, in the event that we have unforeseen hits on our incomes later in our lives.