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Choosing a 15 or 30 Year Mortgage

choosing mortgage term lengthThe most common time period for people to have a mortgage is 30 years.  However, how do you know if a 15-year mortgage is better suited for you?  Let’s delve into some of the positive aspects of a 15-year mortgage: you’ll build up home equity quickly and you’ll pay your loan off quickly.

If you are refinancing from a 30-year loan to a 15-year loan, you’ll want to be aware of any potential fees that could offset the savings from switching mortgage term lengths.  You’ll also want to take interest rates into account when making your decision.  Interest rates are currently very low, so you might to keep your current 30-year mortgage intact.  This would allow you to achieve a greater return on investment through investing your current earnings and savings as opposed to increasing your monthly payments.  On the flip side, interest rates are currently very low, so you might want to refinance to a 15-year mortgage so you can pay off your house more quickly.

The biggest factor surrounding your term length is how well you will be able to meet all of your other monthly expenses.  For example, if you haven’t yet started saving for retirement and refinancing to a 15-year mortgage will equate to an extra $300 a month in payments, that probably isn’t a wise decision.  You will have to do a careful cost-benefit analysis regarding whether or not you will invest in your home now or your future later.  If you have already started saving for retirement and can keep up with an extra monthly payment, you might want to think about refinancing to a 15-year mortgage.

Here’s the bottom line: if you have already been investing in your retirement for a while, feel free to refinance to a 15-year mortgage so you can be mortgage-free sooner.  If you haven’t started investing in your retirement, save yourself time and money in the future by keeping your 30-year mortgage.  You’ll thank yourself in your golden years.

 

 

Today's Low Rates

PROGRAM RATE APR
30 Year Fixed 3.875% 3.93%
15 Year Fixed 3% 3.06%
5/1 Arm 3.5% 3.672%
All rates shown with 0 points
Assumptions

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