When it comes to Mortgage loans, rates, and terms, there are many options. Today, we will discuss the two most common loan options; The 15-year fixed rate and the 30-year fixed rate.
In the United States, the 30- year fixed rate is usually the most preferred type of mortgage loan. According to a report by the Mortgage Bankers Association, most people that seek mortgage loans tend to apply for the 30- year fixed rate over the 15-year term loan because of the difference in the monthly payment amount. The 15 year will yield a higher monthly payment, which makes it seem less affordable on a monthly basis and thus, is less preferred.
When it comes to discussing which of these two mortgage loan options are better, it is of great importance to fully have a grasp of the differences between these two and understanding the stability of your income. While the monthly payment amount may be one significant difference, there are other considerations which highlight their differences from another perspective.
Although the monthly payment on a 30-year term loan is considerably less as compared to a 15 year, in actuality, the shorter term of a 15-year makes the loan cheaper on several fronts. Over the full life of a loan, a 30-year-mortgage will end up costing more than double the 15-year option. Generally speaking, interest rates are also lower on 15-year term loans. So, the savings are compounded – lower interest rate over a shorter period. When it comes to the payment plan for a 15-year fixed rate, the mortgage isn’t “stretched out” in comparison to the 30-year mortgage. With a 15-year fixed rate mortgage, loan payments are heavy on principle, light on interest, and finished in 180 months. Overall, a 15-year is a great option for clients with higher, and more stable income.
The 30 year fixed rate is a mortgage payment option that allows an individual to spread the payment over a 30 year period. This loan allows the client to pay a lower monthly fee but comes at a higher interest rate, over a longer period of time. This option will help you maximize your home purchasing budget.
While we may not choose one mortgage term over the other, it is important for you to weigh the options carefully and discuss it with a mortgage expert before deciding on which to opt in for. If you’re in the market for a home loan or are interested in seeing if you can refinance to a lower rate, please reach out via our contact form below, or call to speak with one of our mortgage experts now (877) 922-3863.