A 15-year mortgage is a home loan that is repaid in 15 years or less. Compared to a 30-year mortgage, a 15-year mortgage has a higher monthly payment but comes with plenty of benefits. Here are some of the benefits of a 15-year mortgage.
1. Save money on interest
One of the biggest benefits of a 15-year mortgage is that you can save a significant amount of money on interest. Because the loan term is shorter, you’ll pay a lower interest rate compared to a 30-year mortgage. Additionally, you’ll make fewer payments over the life of the loan, which means you’ll save even more money on interest.
2. Build equity faster
Another advantage of a 15-year mortgage is that you’ll build equity in your home faster. With a shorter loan term, more of your monthly payment goes towards the principal balance, which means you’ll pay off your mortgage faster. This is beneficial because it enables you to own your home outright sooner, and it also gives you more leverage in the future if you need to sell your home.
3. Lower total cost of borrowing
A 15-year mortgage has a lower total cost of borrowing compared to a 30-year mortgage. This is because you are borrowing the money for a shorter period of time, which means your lender will charge you less interest. Over the life of the loan, you’ll pay less in total interest, which means you’ll save money in the long run.
4. Protect yourself from rising interest rates
A 15-year mortgage can also protect you from rising interest rates. With a 30-year mortgage, you are locked into a long-term loan that can be affected by fluctuating interest rates. A 15-year mortgage, on the other hand, has a lower interest rate, which means you’ll be protected from rising rates in the future.
5. Achieve financial stability
Lastly, a 15-year mortgage can help you achieve financial stability. By paying off your mortgage in 15 years or less, you’ll have more disposable income in the future that you can use for other expenses, like retirement or education. This can give you a sense of financial security and enable you to live a comfortable lifestyle without worrying about mortgage payments.
In conclusion, a 15-year mortgage is a great option for those who want to save money on interest, build equity faster, lower their total cost of borrowing, protect themselves from rising interest rates, and achieve financial stability. It’s important to weigh the pros and cons of each type of mortgage before making a decision, but a 15-year mortgage can provide a lot of benefits in the long run.