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Are 30 Year Home Loans Best for You

At Energy Smart New Homes, we are all about getting you the most for your money. One area that many home buyers are concerned with saving money in is with their mortgage. For most of us, a 30-year fixed rate mortgage is what we hear about most commonly, and it is what’s most popular among home loan borrowers today. But this type of mortgage is not the only option. How can you decide which kind of mortgage is best for you? Let us help shed some light on this confusing subject.

In this article we will delve into the benefits and pitfalls of both 30- and 15-year mortgages.

The upside of a 30-year mortgage is that it gives you a lower month to month payment. Yay! The downside? Interest. Over 30 years, you will ultimately be paying thousands of dollars more than a 15-year mortgage due to interest.

For example, the difference between purchasing a home for $150,000.00 with a 15-year fixed rate mortgage at 8% interest versus a 30-year fixed rate mortgage at 8% would look a little something like this:

Monthly Payment:

15-year: $1,433.00, 30-year: $1,101.00

Interest on first 5 years:

15-year: $54,158.00, 30-year: $58,644.00

Interest on the full term of mortgage:

15-year: $108,026.00, 30-year: $246,233.00

As you can see, although you save $332.00 a month in the 30-year mortgage, by cutting that mortgage time in half, you would save $138,207.00 in interest with the 15-year mortgage. If, however, you have the self-discipline to invest the money you would be saving monthly with the 30-year mortgage, it may still prove to be a good choice for you.

Another factor to consider is equity or how quickly you would like to own your home outright. A 30-year agreement, of course, will take longer to build equity and to own your home fully.

By far, home buyers choose the 30-year mortgage option over a 15-year. Investors have expressed that if a 35- or 40-year loan was offered though, that this would likely be the most popular course for many to take. Ultimately, you will need to carefully consider your finances and what your financial goals are. Make sure to weigh out all your options and choose what will set you up best for the future.

Remember that what might be best for others may not be right for you, so resist the urge to compare your choice with friends or family. If you do need advice, try reaching out to a financial advisor. They can help answer all your questions concerning complicated matters such as mortgages.

If you are ready to take the next step into homeownership, congratulations! If you happen to be looking in Alabama, we would love to help you find your home sweet home. If you would like to be able to put more money towards your mortgage instead of your utility bills, you have come to the right place.

By Energy Smart New Homes 8-8-2019