When it comes to requesting a mortgage loan, among the most important factors is that you can repay it and that your budget aligns with the loan.
Looking at what banks and credit unions offer, there are several different programs, but it seems that a 15-year mortgage is becoming more popular with each year.
In this article, we will help you determine whether it is the right option for your needs.
What is a 15 Year Mortgage
It is defined as a home loan that you will be repaying throughout the next 15 years. While it can have an adjustable rate, in most cases, credit unions and banks offered a fixed 15-year mortgage. What this means is that there will be no changes to your interest rate at any given point.
In order to calculate an estimated value of your 15-year loan, you will want to use a NerdWallet mortgage calculator.
Type in the price of your home (purchase), down payment, years (15), and the interest rate (estimated). You should also take into consideration factors such as mortgage insurance, especially if the down payment is below 20%.
Before we get into the pros and cons, we want to address that a 15-year fixed mortgage loan is adequate for first-time owners, as well as those interested in buying another home or enjoying a refinancing plan.
It is a fact that apart from the bigger payment than with the 30-year mortgage, there is not a lot you will need to worry about.
How is it Beneficial
The main advantage of a 15-year mortgage is that you will be paying off the principal much faster. This is because of the higher down payment but a lower interest rate in the long term.
Thus, if you are looking to build equity, then a 15-year mortgage seems like a great decision.
Another benefit that you will enjoy by applying for a 15-year mortgage is the fact that you will become the full owner in a shorter period. This is something that most people do appreciate, as it comes with a feeling of safety (no one can take your house as collateral).
Last but certainly not least is the fact that in the longer term you will be saving a lot of money compared to the 30-year period.
Because there is a lower risk with the 15-year loan, the lenders are willing to offer a lower interest rate, which does come down to the fact that you will save a lot of money just on the interest rate.
Who is Eligible
There are a couple of qualifications when it comes to a 15-year mortgage. First and foremost, you need to be over 18 and a US citizen.
Along with that, you have to have an open bank account, and a good income (better than if you were applying for the 30-year loan).
Pros
Opting for a fixed 15-year loan is a great solution when it comes to financing your house. The fact that both the payment and the interest rate will stay the same throughout the repayment process is just one of the advantages.
- Less total interest
- Lower interest
- Fannie Mae
- Better equity
- Faster ownership
- Long-term savings
Cons
However, while there is more than a couple of benefits to the 15-year mortgage, there is also a few cons:
- Less affordable
- Higher monthly payments
How to Apply
In the times that we are living in, applying for a loan has never been easier. The first thing that you should do is conduct adequate research to find a lender that offers a suitable loan.
Once you have done that, move on to agree on the offered interest rate/down payment, and submit all the required documents. You should get accepted for a 15-year mortgage within a couple of business days.
Summary
Whether you are looking for a new loan in order to buy a house, or you want to refinance the existing plan, a 15-year mortgage does seem like a great solution.
While you will be faced with a higher down payment, in the long term, you will not only pay the loan off faster but also make long-term savings in the process!
