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30 Year Mortgage vs 15 Year Mortgage

30 Year Mortgage vs 15 Year Mortgage

Discussions of mortgages often focus on interest rates, but there is a much more basic decision to be made. Should you go with a 30 year mortgage term or a 15 year mortgage term?

So, which one?

30 Year Mortgage vs 15 Year Mortgage

Any discussion about mortgages tends to turn on two points.

1.How can you qualify for the most money with the lowest payment?

2.How can you get the lowest interest rate for the mortgage?

 

While these are two important issues, there is an addition one that people fail to consider, resulting in significant wasted money.

The term of a mortgage is extremely serious for a couple of reason. First, it sets the length of the obligation you are undertaking. Second, it defines the amount of interest you are going to pay over the life of the loan. These are massive issues when it comes to building equity.

The longer the loan, the more total interest you are going to pay. The trade off, of course, is you are going to have smaller monthly payments the farther you stretch out the obligation. While this may sound like a good goal when you first get the mortgage, it can have a negative effect on you in the long run.

Most people focus on interest rates as a way to save money on mortgages. This is a valid approach, but playing with the length of the loan is a better way to save money. If you can cut the payments in half by going with a shorter loan, you can save huge amounts on the total interest repaid to a lender.

The decision on the term of the loan is relatively simple, but entirely dependent upon your personal situation. There is no 100 percent correct choice. First, you need to determine if you can easily afford the higher payments that come with a shorter-term loan. In general, a 15 year mortgage will have payments 20 to 25 percent higher than a 30 year loan. Of course, you will pay the loan off faster, which will in turn mean that you will be building equity in your home quicker.

The modern mortgage industry has a variety of different term length products. When applying for a loan, take the time to assess the different terms to see if you can find a loan that is perfect for your situation. You may also seek advice for a mortgage broker. A mortgage broker is an independent adviser who can give you the best options from the entire market.

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