Random Thoughts

Should You Consider a 15-Year Fixed Mortgage?

November 20, 2009 by · Leave a Comment 

For today’s home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.

The 15-year/30-year interest rate spread is near its 5-year high.

Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments.  This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.

As compared to 30-year terms, 15-year products repay 3 times as much principal each month.

Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting.  The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.

Another negative is that the sheer size of the payment.  If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do. 

In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term.   If you can manage it, though, the rewards are tangible.

At today’s rates, a 15-year fixed versus a 30-year fixed costs $230 extra per $100,000 borrowed.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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