The 30-year fixed-rate mortgage has become somewhat of an archetype of first-time home ownership. A majority of homebuyers past and present rely on the 30-year for financing.
When you have the financial capacity, however, you can get a 15-year fixed-rate mortgage and save more money in the long run.
Looking at the Long-Term
Those that want to have low monthly payments can obviously go for the 30-year mortgage. Low monthly mortgage payments can easily be taken into account when budgeting. Looking at the long-term, however, 30-year mortgages cost more than their less popular 15-year counterparts.
Discovering the Benefits
The 15-year obviously allows you to be mortgage-free by the end of 15 years – half the time it would take you to be mortgage-free with a 30-year. Looking at the numbers, however, you also get to save more in interest with the 15-year. You save more because of the shorter term.
At the same time, the rate of a Salt Lake City mortgage lender for 15 years sits lower than a 30-year’s.
Crunching the Numbers
The average rate for 30-years currently sits at 3.79 percent, while the average rate for 15-years is at 3 percent. At these rates, when borrowing $200,000, you must pay $930.78 and $1,382 in principal and interest per month for the 30-year and 15-year respectively.
At the end of their terms, you will have paid a total of $335,080.80 and $248,760 respectively. You save $86,320.80 with the 15-year!
Considering the Higher Monthly Payments
Of course, the benefits come at the cost of higher monthly payments. When you can pay higher monthly, however, you can reap the perks of the 15-year fixed-rate mortgage.
You can even pay down your home loan little by little if you are allowed to pay extra towards your principal. You can pay off your mortgage earlier than 15 years!
You can take a look at your financial situation to see if you can support a 15-year fixed-rate mortgage. You can then enjoy all benefits that the loan has to offer.