15-Year Mortgages Increase in Popularity

When it comes to mortgages there are many different types of loans to choose from, including the 15 year mortgage. The 15-year loan, as opposed to the 30-year mortgage loan, has many positives that is appealing to today’s home buyers. It allows homeowners to build equity faster and pay off the note sooner. It gives them more of a hedge against falling home prices should they have to sell before the 15-years are up. Finally, the 15-year loan saves hundreds of thousands of dollars on interest on the price of the home.

Refinancing Existing Loans

Interest rates are super low these days and many existing homeowners are realizing it may an opportunity that is short-lived. To take advantage of the low interest rates, they can refinance homes that may have 6% rates or higher to a low to 3.75% to 4% with a 15-year loan and still end up paying very close to what they used to in monthly payments. If they refinanced the loan and stuck to a 30- year loan, the payments would drop, but they’d have to start all over again to repay the note. With the uncertain future ahead, many homeowners want to make sure they have a roof over their heads paid in full as soon as possible. Thus, when refinancing in the first six months of 2010, a large percentage of people (about 26%) chose to go with a 15-year loan. In 2009, that figure was closer to 18%.

Your Payments May Increase

Before you take the plunge, be aware that your payments may rise. If you can support an addition hundred to two hundred dollars in a monthly mortgage payment, then this option can be right for you. However, if you are already struggling with the monthly payment amount you currently have, then sticking with a 30-year loan can reduce the monthly payment when you refinance to a lower rate. It all depends on whether you want to own the home faster and save money over the life of the loan or whether you want to save money on the monthly payments to decide what term is the best choice for you.