Buying a home is probably one of the biggest, most important, and smartest financial decisions you will make in your life. There are several options as far as the terms of your fixed rate mortgage. The basic types of mortgage loans terms are a 30 Year Fixed Rate Mortgage, a 20 Year Fixed Rate Mortgage, and a 15 Year Fixed Rate Mortgage. Throughout those years, the interest rate and principal payments should remain the same. Escrow items such as property taxes, homeowners insurance, and your PMI (Private Mortgage Insurance) can go up but most generally your monthly payments should be very stable.
A 15 year fixed rate mortgage pays off your mortgage debt the fastest over all the other fixed rate mortgages which saves you lots of money in interest charges. This mortgage amortizes principal and interest over 15 years & may save a considerable amount of total interest in the long run but the monthly payments will be much higher than the 30 year and 20 year fixed rate mortgages. This type of loan offers the least amount of tax deductible interest. A 15 year fixed rate mortgage loan is just right for those people that don't want to pay all the interest they would pay on a 20 year or 30 year fixed rate mortgage. With the 15 year fixed rate option, not only do you become debt free the fastest but the interest rate is the lowest rates that are offered in the fixed rate mortgage loans. If you are planning to stay in your home for a long time this type of loan would be best for you. Be sure to visit our mortgage calculators so you will know what loan term and interest rate that you will be most comfortable with.
There are some advantages and disadvantages of financing your home on a 15 year fixed rate mortgage note. Some advantages are the 15 year fixed rate mortgage will be payed off years sooner and in the process you will save thousands of dollars in interest over the life of the loan compared to the 20 year and 30 year fixed rate mortgage. A 15 year fixed rate mortgage usually comes with a lower interest rate compared to the 20 year and 30 year loan. Another advantage is that with any fixed rate mortgage, your interest rate will remain the same throughout the loan so there are no interest rate change surprises. Some disadvantages of financing your home on a 15 year fixed rate mortgage are your payment will be higher because you are financing it for less years. For more information on the types of loans and which loan is best for you, please be sure to visit our "Which Loan Is Right For Me?"
In short, remember each type of loan has different reasons why you should or shouldn't choose them. The best thing to do is do some research before applying and find the best interest rate and loan term because this will help keep your payments lower but it could actually save thousands of dollars in finance charges over the life of your loan.
