Question by Spiderspider: Is there any advantage to getting a 15 year fixed mortgage?
If I sent in a little more money to my current 30 year mortgage so that it was paid off on the same timetable as the 15 year, am I better off rather than spending money on closing costs? Or does the 15 year mortgage give you a lower interest rate and therefore make it worth the cost and hassle of refinancing?
Best answer:
Answer by glenn
Often a 15 year mortgage has a slightly lower interest rate than a 30 year- but not always. If I am buying a house today I would get a thirty year loan and make the payments as if it was a 15 year loan so that I have a fall-back option if anything gets rough. If you feel very comfortable with the 15 year payments and might even make extra payments to pay it off in ten years then I might take a 15 year loan.
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You normally would get a lower interest rate on a 15 yr fixed than on a 30 yr fixed, but calculate the savings to be sure it’s worth it.
One of the main advantages is you save a great deal of money on interest when you take a shorter loan. However, this also means that you will pay more each month. As a rule of thumb, with a 30 year mortgage, you usually pay at least 100% of the cost of the home in interest. If you use a 15 year mortgage, you will pay much less in interest and sometimes will get a slightly lower interest rate.
With that said, if you can pay off a 30 year mortgage in 15 years, you will usually come out on top.
The advantages of getting a 15-year-fixed-rate mortgage are a substantial savings on interest, faster equity buildup, and typically a lower rate. This type of loan isn’t for everyone, however. Figure out your budget and make sure that you would always be able to make the payments.