When financing a home purchase, many buyers choose a fixed rate mortgage with a 30-year term. This is the first choice of most Americans and a popular option for first-time homebuyers. What makes it appealing it is predictability, which means that the interest rate will not change throughout the life of the loan.
While a fixed-rate is the most popular mortgage type, this doesn’t mean that it’s also the right choice for you. Mortgage Ogden and other mortgage brokers in Ogden note that it’s still important to evaluate your financial situation to choose the best loan.
Strength in Numbers
As this is the type of mortgage Americans prefer, you’ll think that you’re making the right decision. Well, there are right reasons for thinking so. A 30-year mortgage has an affordable monthly payment that will remain constant throughout the entire term. This is the main advantage, which allows you to know the interest and principal payments, helping you budget easier.
A lower payment will also allow you to qualify for bigger loan amounts than a 15-year mortgage. This will also help you build your savings or save for future expenses such as retirement accounts, college, education, travel funds, and investments.
The Lifetime Cost
Over the loan’s lifetime, however, a 30-year fixed rate mortgage will cost you more. This is because a longer mortgage means paying more interest. While you may have lower payment each month, you will also have to pay it longer, translating to more interest. This may not also be the right choice if you have financial goals in the coming years.
If you’re choosing this mortgage and retiring from your job in 10 to 15 years, a 15-year fixed mortgage would be ideal. This is so that you’ll no longer carry the burden of monthly payments and enjoy your retirement worry-free.
Weigh the pros and cons of the most popular mortgage in the U.S. to make the right choice. You may also want to consider other choices like adjustable-rate mortgages (ARMs) or hybrid ARMs. Talking to a reliable lender will help you choose the right one.