For more than 15 years, Darcy Bergen has advised clients on long-term financial planning matters. As the president of Bergen Financial Group, Darcy Bergen gives advice on the benefits and drawbacks of major financial decisions, including 15-year mortgages.
Since 15-year mortgages require higher monthly payments, they are not as common as 30-year mortgages. However, for home buyers who can afford the cost, a 15-year mortgage can reduce the overall price of a home.
The interest rate of a 15-year mortgage can be just under 1-percent lower than the average 30-year mortgage, which can result in tens of thousands of dollars in savings over the life of the loan. Additionally, higher monthly payments mean that homeowners build equity quicker since a higher percentage of each payment goes toward the principal balance.
However, qualifying for a 15-year mortgage may be more difficult than qualifying for a 30-year mortgage unless the home buyer has a relatively low debt-to-income ratio. Another drawback is that a 15-year mortgage gives a home buyer less buying power, so the buyer may only be able to afford a smaller home.
Since 15-year mortgages require higher monthly payments, they are not as common as 30-year mortgages. However, for home buyers who can afford the cost, a 15-year mortgage can reduce the overall price of a home.
The interest rate of a 15-year mortgage can be just under 1-percent lower than the average 30-year mortgage, which can result in tens of thousands of dollars in savings over the life of the loan. Additionally, higher monthly payments mean that homeowners build equity quicker since a higher percentage of each payment goes toward the principal balance.
However, qualifying for a 15-year mortgage may be more difficult than qualifying for a 30-year mortgage unless the home buyer has a relatively low debt-to-income ratio. Another drawback is that a 15-year mortgage gives a home buyer less buying power, so the buyer may only be able to afford a smaller home.
