What is the deal with a 15 year mortgage? Should I consider one when buying a Denver home? It certainly is a good question and one that we hear more and more now that rates for 15 year mortgages are so incredibly low.
The average for a 15 year mortgage is now down around the 3% level which is just plain crazy. In the past, lots of buyers shied away from 15 year mortgages because if you are paying your home off twice as fast, obviously your monthly payments are going to be much higher. But with rates so low, you might be surprised as to what you can afford and the benefits of paying it off in 15 years as opposed to 30 years are obvious.
Let’s look at some numbers. If you were to get a 15 year mortgage on a $250,000 home with 3.5% down and a 3% interest rate, your monthly principal and interest payment would be $1,677. Say three years ago when rates were around 6%, if you were to do the same loan only this time a 30 year mortgage, your monthly payment would have been $1,446 a month. So you can see why with rates so low a 15 year mortgage is worth considering these days.
And to give you an idea of the benefits of paying off your home twice as fast, how about the number $235,000. That is how much more in interest you would pay for the life of the loan if you had a 30 year mortgage at 6%, almost as much as you paid for the house to begin with. So the question is, can you afford to pay a higher monthly payment each month for a 15 year mortgage? The benefits are obvious and with rates so low, definitely a good time to take a closer look.