There are a lot of financing options available to help you purchase real estate, especially if you meet credit guidelines.
Most lenders prefer to offer 30-year mortgage loans. With a longer loan term, they collect more money in interest over the life of the loan, but if you have strong credit, a 15-year mortgage may be a better option, and one worth considering. Here’s a breakdown of the two:
What About a 30-Year Mortgage?
Thirty-year mortgages are the most common option for homebuyers. Monthly payments are typically more affordable, which is why lenders frequently recommend them. You may even qualify for a larger loan amount with a 30-year term. However, you’ll usually end up paying a higher interest rate over time, and significantly more in total interest.
What Are the Benefits of a 15-Year Mortgage?
A 15-year mortgage can save you a substantial amount of interest. While the monthly payments are higher, the loan term is cut in half and so is much of the interest you’d otherwise pay.
After just 16 years, you could be mortgage-free and ready to redirect that money into investments, other real estate properties, or long-term financial goals. Building wealth becomes easier when you are no longer tied to a three decade-long mortgage.
What About Prepayments?
Even if you decide on a 30-year loan, you can still benefit from early repayment strategies. Making extra payments toward the principal allows you to shorten the life of the loan, often dramatically, while maintaining the flexibility of lower minimum payments. Just check with your lender first to ensure there are no penalties for prepaying.
A 15-year mortgage is often the better financial choice because of the potential to save thousands in interest. You’ll pay off your home faster, build equity quicker, and gain more financial freedom in the long run.
No matter how you decide to finance your real estate purchase, we can help you find the best fit. Give us a call today!