Or maybe not…
With 15-Year fixed rates still in the 3.25-3.5% range, now may be the time to potentially save over $100,000 by shortening the term of your loan. Say what? Yep, you heard it right. If you took out a $400,000 30 year mortgage in 2012 with a 4% rate you would be sitting at a principal balance of about $362,000. By converting it now to a 15-year fixed mortgage at 3.5% you would save $103,159 in principal and interest payments by cutting the term short by 10 years. Of course, the monthly payment will be higher with a 15-year term, but so is your income now, and it should continue rising over the next 10-15 years.
Fifteen year fixed loans aren’t for everyone, but it may be something to consider as there are a number of benefits to a shorter loan term vs. the traditional 30-year fixed.
Here are 5 indisputable reasons you may want to consider a 15-year or even 20-year term:
- Interest Paid – Over the life of the loan a 15 Year mortgage will typically result in more than 60% less Interest-paid – that is a huge savings!
- Payoff the Mortgage Faster – especially for borrower’s nearing retirement who will see disposable income significantly reduced with a mortgage payment in retirement.
- Same Rate, Less Risk – The 15 Year is comparable to a 5 or 7/1 ARM rate today, but with no interest rate risk vs. an ARM which adjusts after the initial fixed period.
- Loan Level Price Adjustments – 15 Year Fixed loans (FNMA) carry less LLPA’s, meaning better rates and more rebate for higher LTVs and Lower FICO scores.
- Build Equity Fast – Down the line there will be more flexibility for HELOCs, and cash-out in general (such as for home improvements).
Give us a call to discuss if a 15-year could be right for you!
Sr. Mortgage Advisor
tel 925-394-7732 | cell 925-381-8190