When applying for a home loan, you have the option of getting a 15 or a 30-year mortgage. There are pros and cons to both options, so here are some of the comparisons:
With a 15-year mortgage, the interest rate is less and you are borrowing the money for half as long so you are definitely saving money.
- The Federal Housing Administration (FHA) charges lower mortgage insurance premiums.
- This option is a form of forced savings and the home is likely to go up in value or appreciate.
- You will have a higher monthly payment
- You may have to settle for a less expensive home due to the higher payments
- You may have less liquidity or cash reserves to put towards savings
- With a 30-year mortgage your payments are lower.
- You have some flexibility to pay more without any penalties.
- You may qualify for a more expensive home.
- Tax laws allow a deduction of mortgage interest
- Lenders do charge a higher interest rate.
- You will pay much more in interest over the life of the loan.
- You will build equity in the home at a much slower pace.
- You may borrow more than you can really afford.
There is no right answer as to which is the better option. It depends on your financial situation, goals and priorities, both now and in the future. We, at Whippet Properties of Florida, can guide you to the right lender to determine which is best for you!