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In early April, Freddie Mac reported that the average rate for a 15-year mortgage increased to 3.39 percent from 3.33 percent the previous month, which is still about a point lower than a 30-year mortgage. While these rates are still historically low, some industry experts predict these low rates won't last long. If you're thinking of going for (or refinancing) a 15-year mortgage, now's the time to do it.
The main benefit, of course, is that a 15-year mortgage allows you to pay off your mortgage twice as fast as a 30-year term, while saving a significant amount of money on interest in the process.
A 15-year fixed-rate mortgage has proved popular with young homebuyers as it enables those with sufficient income to meet the higher monthly payments to pay off the house before their children start college. It also appeals to those already established in their careers who may want to have their mortgage finished before they retire.
These mortgages also provide additional financing options thanks to the equity built up in a house. For example, one can easily take out a second mortgage by banking on the equity already in their home.
One negative to the 15-year mortgage is that tax benefits are less. The amortization schedule of a 30-year fixed is back heavy, with early-term payments big on interest and light in principal. Meanwhile, a 15-year fixed-rate mortgage is always light on interest, so deductions are not as large.
It's also important to take into consideration that the monthly payments for this type of loan are higher than those for a 30-year mortgage by about 10-15 percent.
When it's time to make a decision, your personal financial situation will determine the right mortgage term for you. If you can afford the higher payment, have a substantial emergency fund and can meet all savings goals, a 15-year mortgage is a great way to own your home faster and pay less money in the process.
To learn more about the 15-year mortgage, contact our office today.
Published with permission from RISMedia. If the email address was found in our system, your password has been sent. Please check your inbox.
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