When you buy a house, your mortgage won’t be one-size-fits-all because, as the buyer, you’re in control and you get to pick how your loan gets put together. And one of the choices you get to make is over how many years you pay back your loan.
The most common choice? Thirty years, and that’s because a 30-year loan spreads payments out over three decades which makes for lower payments.
But the second most common choice is the fifteen-year loan, which compresses your payment into half the time – but don’t expect a payment that’s twice as large – usually it’s only about two-thirds of that, which means that choosing a fifteen year mortgage save you money in the long run, even as it costs more today.
And, those savings get a boost from the lower interest rates of a fifteen year mortgage because lenders prefer that their loans are paid back in fewer years if they can help it.
So, there are advantages of using a fifteen-year home loan, but that choice and its payment will cause you stress or strain your budget, stay clear. Shorter mortgage terms are an option you have as a buyer and that’s all. You’re not forced to it. And, it’s better to have some cushion in your budget at both the start and end of each month.
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