The conventional 30-year fixed-rate mortgage isn't your only home loan option! If your financial plan aims to pay off your mortgage before retirement, a 15-year fixed mortgage might be worth considering. As its name suggests, a 15-year mortgage is one that's paid off after 15 years. Since it amortizes fully, after that amount of time you won't have to pay anything else. This type of mortgage has a lot of benefits, and below we'll share just a few of them.
Here it highly depends on when in life you choose to take on the mortgage. However, most people decide to take on a mortgage at around 30 years of age. If this is the case for you, then it means you'll be 45 years old when your mortgage will be fully paid. There will be no need to worry about having to use Social Security or pension checks to pay it off.
Another consideration is the fact that the older you are, the more your health costs will go up. Having costs like that pile up while having to make mortgage payments can be a huge problem. For that reason, not having to pay off your mortgage after retirement is a tremendous bonus.
You might think your house is yours the minute you step into it. However, in reality, it's only yours after you have fully paid your mortgage off. Until then, it can be repossessed if you fail to make payments.
With a 15-year mortgage, your home will become yours in the blink of an eye. Then, you'll have plenty of time to enjoy other things in life, knowing you already own your home.
If you were to pick, say, a 30-year mortgage, there will be twice as many years in which interest will add up. This will more than double the amount you end up having to pay, as mortgage interest compounds over time.
As such, getting a 15-year mortgage will not only reduce the time you'll pay it off; it will also reduce the amount you pay back. Saving both time and money is an amazing deal.
On most 15-year mortgages, the amount you have to pay in terms of rates is usually lower than for 30-year ones. As such, you'll be saving money in two ways. First, you'll save by reducing the time, then, by reducing the actual rate.
Some people fear getting a 15-year mortgage. The reason is that they think the payments will be too expensive. They think that getting a 30-year mortgage is likely a better idea. This is sometimes true: if you can't afford to make the payments of a 15-year mortgage, you might want to reconsider. However, if you can afford it, don't let fear prevent you from making an educated choice. Pushing yourself to achieve something you truly want is a good thing. You'll become a stronger person, and you'll have more reason to be proud of your achievement.
While they're not the right financial fit for everyone, a 15-year mortgage has many benefits. The main one is simply that you'll be able to pay the mortgage off faster, which means that you won't worry about it for as long as a 30-year term. This, in addition to the fact that you'll be paying less, are very convincing features.
If you'd like to learn more about 15-year mortgage plans, contact us for more information, or download Your Guide to Happy Homebuying for a comprehensive look at the merits of different loan options.