Sorting through mortgage terms and options can be overwhelming. We get it! There are many different types of loan programs available, and they all have pros and cons. A 15-year fixed-rate mortgage might be beneficial for you and your family. Let’s talk about how this program can help you achieve your homeownership goals.
First, let’s review the basics. A fixed-rate loan means that your interest rate on your loan term doesn’t adjust based on the mortgage industry market like adjustable rate mortgage (ARM) interest rates do. What’s a loan term? A loan term includes all the details specific to your loan, including the length of the loan, interest rate, and monthly payment amount.
A 15-year fixed-rate mortgage means that the length of your loan term is 15 years. In other words, you have 15 years to repay the money you borrowed to purchase your home. There are also 30-year loan terms. Your mortgage payments (which include the principal amount you owe, taxes, interest and insurance) are predictable every month and they won’t change unless you decide to refinance your existing loan.
There are many different 15-year fixed rate loan options available for first-time homebuyers, investment properties or refinances. Conventional, FHA, VA and Jumbo loan programs are all available with Guild.
What’s the difference between a 15-year and a 30-year mortgage?
Here’s the biggest difference between 15 and 30-year loans: the total amount of interest you pay over the life of the loan. Why would you choose this loan over a 30-year fixed-rate loan if it works for your financial situation? You save lots of money.
To put it simply, your payments are smaller in a 30-year loan because they’re spread out over a longer period of time. However, more time = more total interest paid over the life of the loan.
A 15-year mortgage may include a higher monthly mortgage payment, but you can save thousands of dollars in interest because you’re paying it off in half the time. (Sometimes, hundreds of thousands of dollars). Think about all the other financial goals you could accomplish.
Not everyone is able to afford higher monthly mortgage payments, but the savings is definitely something to consider.
15-year fixed-rate mortgage advantages and disadvantages
Pro: You build equity quickly. Your home equity (the value of your home) builds much faster because you’re paying off what you borrowed at a faster rate. You could own your home in half the time of a 30-year loan.
Pro: You pay less interest. Overall interest paid is lower than on 30-year fixed-rate loans. In the long run, you could potentially save hundreds of thousands of dollars with the freedom to use this money elsewhere.
Con: Higher monthly payments. Your monthly payments can be significantly higher than those on 30-year fixed loans. Like we explained above, this is because you’re working so hard to pay off your loan quickly. You’re getting the tough part out of the way so you can reap the benefits in the long run.
Con: Lower tax deductions. Depending on how you look at this, it could actually be an advantage. Since you’ll be paying less interest, you won’t be able to deduct as much money come tax time.
*Always consult a Tax Accountant regarding any tax deductions
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction. *By refinancing an existing loan, total finance charges may be higher over the life of the loan. *Information is for general illustrative purposes only. The information is believed to be reliable, but Guild Mortgage does not warrant its completeness, timeliness or accuracy. Guild Mortgage assumes no responsibility for errors or omissions in the information provided. *Typically, a non-purchase second mortgage. **Please consult your financial advisor on the consolidation of short term debt into long term debt.