In our last article, I introduced mortgages, and I also discussed which mortgage is right for you. If you haven’t had a chance to read my previous article, check out our last month’s publication of The Power Is Now Media National Magazine here.
This month we focus on mortgage terms.
So what are mortgage terms?
Many people are now looking to refinance their homes to qualify for better rates, especially after the COVID-19 pandemic.
To refinance, or even if it is your first time getting a loan, one of the decisions you’ll have to make is choosing between the 15 year mortgage term and the 30 year mortgage term.
Which one is right for you?
If you are getting a mortgage loan, know which gives you the best features in terms of the APR and interest rates.
Let’s get started!
15-year mortgage term vs. the 30-year mortgage term
The obvious difference between the two is the repayment period.
However, that shouldn’t be enough to help you determine which one suits you best. There are a variety of other factors that you need to look at, including;
- The interest rates are given and how comfortable you are with them.
- How much interest you are comfortable paying without overstretching your limit.
- How much home you can afford.
- How fast you’d like to be mortgage-free.
The 30-year term is the preferred option for many people, but as you shall find out later, the 15-year mortgage term offers some benefits, but this will depend on your financial goals.
Additionally, it is best to do a bit of homework and establish the groundwork for yourself before settling on one. The best way I recommend you do that is to shop multiple lenders.
This way, you’ll get a feel of what mortgage term offers the best options and is more advantageous and uniquely positioned to help you, depending on your financial position.
The 30-year mortgage term
There are reasons why the 30-year mortgage term is the most preferred option for many lenders and borrowers. These include;
- The 30 years fixed mortgage term is less expensive. This is so because the loan amount is spread for 30 years, resulting in a lesser amount each month.
- There are lower qualifications criteria (earnings and debt-to-income ratio).
- It comes with a lot of flexibility and convenience for the borrower in that they can choose to pay back the loan faster.
The drawbacks of the 30 years fixed mortgage term are;
- You could end up paying more in interest over the life of the loan.
- You’ll find out that the rates for the 30 years fixed mortgage rate are often higher.
The 15-year Mortgage Term
Some of the pros of taking a 15-year mortgage term include;
- You will be paying very low interest.
- You can be able to save more over the life of the loan.
- You can build equity in your home way faster.
Cons
- Because you will be paying a higher amount, you won’t have as much money to spend on other needs.
- Your monthly payments to service the loan will be more significant.
So which is better?
Honesty, I cannot tell you definitively that the 15-year mortgage term is better than the 30-year one. The reason being there are so many factors unique to you that will affect the terms of the loan you take.
For example, if you want to pay your loan faster and save more while on it, the 15-year mortgage term should be the best option for you. But what if you do not have enough, or let’s say you want to achieve the homeownership goal while also saving for retirement? Then the 30-year mortgage term should do the trick.
But one thing that’s for sure is that interest rates are low, which means that now would be the best time to buy a home. Talk to our mortgage advisor Eric Lawrence Frazier the Founder and CEO of the Power Is Now Media, at 800-261-1634 ext. 703.
About the Power Is Now Media
The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com
