The conventional 30-year mortgage that most home buyers opt for looks viable because of the low payment. Let us scan the other options available and see if something benefits you to a greater extent. Have you ever considered the best refinance rates if the option for another mortgage scheme arises in the midst of the first one? Is such a thing possible?
How do you benefit from a 15-year fixed-rate mortgage?
A fixed-rate mortgage means that the payments are unchanging. Opt for that always rather than the variable-rate mortgage. All kinds of charges beyond your control will increase the amount every month.
We live our lives surrounded by ample low-rate finance schemes amidst numerous loan givers and takers. Let us explore the reasons for favouring the 15-year mortgage term as the most beneficial while buying or refinancing a house.
Researching financing rates for 50 years in weekly surveys, Freddie Mac finds that the present rates are very low. Rates have fallen within a few basis points of record lows for both the 15-year and 30-year mortgages?
The 15-year mortgage advantages
Consider 3 major benefits:
The interest you pay over the term naturally works out to so much less with the 15-year loan. In the 30-year loan payback beginning, you start paying back more of the interest rather than the principal amount. It is different with the 15-year fixed system; you begin by payments towards the balance rather than the interest each month. Doesn’t it mean that you save thousands of dollars across so many years?
The term criteria hold true even if the interest rate remains unchanged. Consider an example to get it better. Amortization calculators do help. Theoretically, a house in Texas has a $200,000 loan for 30 years. The interest rate is 2.98%. Your monthly payment works out to $841.05. Interest accumulated works out to $102,778.78.
Searching for the best mortgage refinance rates, what happens if the term changed to 15 years with all other criteria remaining untouched? You certainly pay higher every month at $1,379.24. Yet, the interest has reduced to less than 50% at $48,263.26! Won’t that make a great difference?
Consider the inflation aspect
How lower rates benefit derives from mortgage rates that depend upon prices of bonds. In the mortgage security market, investors wish to be assured of safe returns in the face of inflation. Since inflation gets higher with time, longer-term interest rates would be higher.
- At one point in time, a 15-year loan may attract 2.5% (2.924% APR).2
- Compare that with a 30-year fixed loan with 2.99% (3.225% APR).1
With the low-interest rates like prevails nowadays, you will not feel the pinch of higher payments in the short duration loan of 15 years. Pay for enough points and the rate may reduce below 2%. Pay the mortgage so much faster.
What is your situation regarding the 15-year option?
Refinance rates suit you if you are:
- Able to pay higher amounts monthly
- Going to retire soon
