How Long Should Your Mortgage Be?
LOS ANGELES, Dec. 18, 2012 /PRNewswire-iReach/ -- Is a 15-Year or a 30-Year Mortgage Right for You?
There are plenty of different types of mortgages available today, but 15-year and 30-year mortgages are the most popular. Realtypin's Mortgage Center will give you plenty of options to choose from – and all of the rates are low – so how do you make the right decision for your needs?
You've got to weigh the pros and cons of each, then apply them to your specific budget and comfort level.
Here's what you need to know to do it:
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- The monthly payments are higher on a 15-year mortgage
If you think that's reason enough to opt for a 30-year mortgage, think again. While you may pay a little more each month, you'll wind up paying your mortgage off sooner. And, in the process, you'll wind up spending a whole lot less money in interest.
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- A 30-year mortgage comes with a bigger tax deduction
The more interest you pay, the more money you'll get to save on your tax return every April. So, you'll have to decide what's more important – saving money in interest or writing a smaller check to Uncle Sam every year.
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- You get to build equity faster with a 15-year mortgage
When you have less interest to worry about, more of your money goes to the principal on your home. That's a fancy way of saying you're paying off the price of the house – instead of paying a bunch of money to your lender. That means you're building more home equity, which means you'll be able to take advantage of better perks sooner (like home equity loans).
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- A 30-year mortgage comes with more flexibility
Just because you have a 30-year mortgage doesn't mean you have to take 30 years to pay it off. If you want to pay more in a certain month (like if you get a bonus at work or have a little extra money tucked away in savings for awhile), you can.
But when you have a 15-year mortgage, you've already got higher payments to worry about. As a result, you probably won't have a whole lot of extra money left over to make extra payments.
Bottom line – in the 15-year vs. 30-year mortgage debate, there is no "wrong" answer. It's all a matter of finding a loan that you can afford, that also meshes with your own personal comfort level.
And, down the road, if you think you made a mistake, you don't have to live with it. After all, refinancing gives you a chance to wipe the slate clean and start over with a loan that really is perfect!
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