Measuring the Benefits of 15 Year Mortgages

One of the first things that you need to decide on when taking on a mortgage loan is the length of time that the loan will be active. For example, does it pay to go with a 15 or a 30-year mortgage loan? 

Here, we will take a look at the numerous reasons why it pays to consider a 15-year mortgage as compared to other loan terms – be it a fixed or adjustable rate mortgage. 

Taking the First Step – Comparing Mortgage Rates 

As a homeowner, the first thing that you need to think about when considering whether you should go for a mortgage refinance or not is the current market conditions. Today, the real estate market works in such a way that interest rates on both adjustable and fixed rate mortgages are at historic lows. According to Freddie Mac, when you consider a 5-year, 15-year or 30-year mortgage – you will see that the interest rates are running at more than 75% lower. 

Whether you’re buying a new home or considering refinancing, you will see that this is the perfect timing for homeowners like you. Just remember that it is a must for you to weigh in all the possible options first. 

Make a comparison of the mortgage rates. Check on the weekly Freddie Mac market survey. What is the average interest rate for a 30-year fixed rate mortgage? How does this compare with the standard interest rates offered by private lenders? 

Based from the results, you can then come up with an intelligent decision as to whether now’s the right time to refinance or buy a new home – or if you have to wait for the market rates to ease a bit. 

When It Makes Sense to Go for a 15-Year Term 

So when is it more desirable for a homeowner to go with a 15-year term when refinancing or buying a home?  It is a particularly attractive option for homeowners who would like to shorten their 30-year mortgage while getting lower rates at the same time. Make rough estimates for the interest rate that you would have to pay for a 15 and a 30-year mortgage. As you do so, you will see that you can actually pay off the loan faster while saving you thousands of dollars in interest rate in the long run. 

But what if you have a mortgage loan with an adjustable interest rate? This is the time that you need to consider all your options carefully. Refinancing the loan might be a good idea if you are planning to stay in the house for a few years – although it would still depend on the market conditions. 

An adjustable rate mortgage also comes in handy if you would like to have lower interest rates as compared to fixed rate loans. For this, you would have to refinance within a certain period of time, after which the loan will be reset to new rates based on existing market conditions. 

Learning as much as you can about the particular type of mortgage loan that you will take advantage of is the key if you want to get the best set of benefits. By doing so, you will gain that edge as a homebuyer and properly decide whether you should refinance or not. 

Article Tags: Interest Rates, Fixed Rate, 30-year Mortgage, Interest Rate

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