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Low mortage rates increasing 15 year mortgage affordability

Created: On August 22, 2011 @ 1:15 pm In

Record low mortgage rates are making mortgage loans more affordable than ever. Evaluate your current financial situation along with your goals for future relocation and retirement. A fifteen year mortgage provides debt help with meeting your goal of retiring debt free.

Mortgage benefits from a 15 year plan

Use a free online mortgage calculator for estimating savings associated with a 15 year mortgage. Estimate and deduct closing costs from potential savings on interest. With this calculated figure in mind, consider these benefits:

  • Pay off your mortgage faster: Refinancing might mean making higher payments with a 15 year mortgage, but the benefit of paying it off sooner is a great plus if you’re concerned about retirement assets and rising expenses.
  • Lower mortgage rates: 15 year mortgage rates are typically lower than 30 year fixed rate mortgages. A shorter repayment term translates to less risk for mortgage lenders, and your ability to qualify for the higher monthly payment required of a 15 year mortgage suggests financial stability.
  • Potential savings on interest: Estimate interest savings using an online mortgage calculator. Enter your current mortgage balance, interest rate, and repayment term for each loan. Subtract the lower amount from the higher amount; the result represents potential interest savings.

Drawbacks to a 15 year loan

  • Higher monthly payments: Your monthly mortgage payments will likely increase. For example, a 30 year mortgage for $200,000 at 4.25 percent has a monthly principle and interest (P&I) payment of $983.88. A 15 year mortgage of the same amount and interest rate has a monthly P&I payment of $1504.56, a difference of $520.68. Meeting the higher payments for a 15 year mortgage might mean less money for other essentials and savings.
  • Higher risk of financial hardship: Substantially higher mortgage payments can increase the risk of foreclosure or bankruptcy in the event of long term hardship.

Consult a financial advisor for recommendations based on individual circumstances and financial goals.

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