When it comes to our mortgage payments, we’d all like to make half as many payments and save thousands of dollars on interest, all while paying a low-interest rate. If this sounds like a fantasy, then you’re wrong. People across the country are doing exactly this by picking a 15-year mortgage. If the situation is right, here are a few of the reasons you should consider a 15-year mortgage.
1. Save Money
Taking out a 15-year loan saves you considerably because it cuts your loan repayment time in half. This can save you tens of thousands of dollars in interest. Also, 15-year loans usually offer better interest rates than other loans because you are low risk. If you’re curious about how much money you can save there are plenty of online tools that can help you calculate and compare the amount of payments, interest rates, and more. Seeing the difference may give you the motivation for choosing a 15-year loan.
2. Build more equity
Besides saving a great deal of money, you would also be building more equity, faster. A shorter mortgage payback period combined with rising home prices could increase your equity exponentially. This is ideal for people who want to refinance their homes down the road.
3. Reduce pressure on your monthly budget in retirement
If you plan to retire within the next 10 to 20 years, a 15-year mortgage is perfect. Many retirees like to downsize; this puts less of a strain on you during your retirement period. It’s better to take advantage of your stronger cash flow while you’re working and make the bigger 15-year mortgage monthly payments before you retire. When you do retire, you’ll have to spend less of your savings on housing since that will be paid off.
4. Take advantage of built-in discipline
Some people choose to accelerate their payments when they choose a 30-year mortgage, which does save money. This sounds like a great plan because you aren’t tied to a higher monthly payment and still save on interest, but many people don’t stick with it. When you don’t have the commitment of paying at an accelerated rate, it is easy to slack off. It is too easy to fall off and make smaller payments.