When you purchase a home and get a loan to buy it, you will have some decisions to make. One of the decisions involves the length of the loan. The most common length is 30 years, but a lot of people are now choosing 15-year loans. If you choose a 15-year loan, you will qualify for a lower rate, in most cases, compared to a 30-year loan, and here are some of the main reasons people choose 15-year loans
They offer lower interest rates
When you have a 30-year loan, it will take you many years to make a dent in the principal balance you owe, whereas you will be able to pay off a 15-year loan faster. Because of this, 15-year loans are less of a risk for the bank offering the loans. The principal gets paid off faster on a 15-year loan, and the entire loan gets paid off faster as well. Banks base interest rates on risk levels, and they are always willing to offer lower mortgage rates when the risk levels are lower. If you want the lowest rate on your loan, you should consider choosing a 15-year loan.
You will have the house paid off in half the time
Of all the reasons people choose 15-year loans over other options is because these loans allow them to repay their loans faster. If you buy a house, would you rather have it paid off in 15 years or 30 years? Most people would agree that being able to pay off a loan in only 15 years would be better. If you are around 30 years old, this would mean you would own your house outright by the time you are 45 instead of when you are 60 years old.
Additionally, you will pay less for the house overall. When you repay a loan faster, you are borrowing money for a shorter amount of time, and the interest you pay on a loan is based on the rate and the length of time you need the money. Paying off a loan in 15 years will save you a lot of money on interest charges, and this means you will pay less in total for the house you are buying. Keep in mind that your payments will be higher if you choose a shorter loan, so you should make sure you can afford the amount before choosing the 15-year loan option.
If you have questions about loans or interest rates, contact a mortgage lender of your choice today.Share