Most people that purchase homes set up their loans in a way that allows them to pay off the balances over a span of 30 years. 30 years is a long time, though, and there are a lot of people that do not want to have to be tied to a mortgage payment for this long. If you feel this way, you could do what other people do, which involves getting a 15-year loan instead. Before doing this, it is important to analyze if this is a good choice for you. Can you or should you get a 15-year loan? Here are some factors to consider when making this decision.
You Will Pay Off the Balance in Half the Time
The reason people choose 15-year loans is to have a way to pay off a house in only 15 years. This is half the time of a normal 30-year loan, and this can be a good thing or a bad thing. It is a good thing because you will own your house outright in only 15 years. It is a bad thing, though, because it means that you will only have 15 years to pay off a really large amount of money. This can cause your payments to be significantly higher than they would be with a 30-year loan, and it can cause money to be a little tighter in your budget.
You Will Pay Less Over All
If you can get by with paying off your loan in 15 years, you will reap a lot of other benefits, though, and the main one is that you will pay less in all for the loan. The first way is by getting a lower interest rate. A 15-year loan will almost always offer a lower rate because the bank has fewer risks with shorter loans. Secondly, you will pay less in all due to the fact that you are borrowing money for half the time. This always results in paying less for interest.
You May Need to Adjust Your Budget to Make It Work
Does a 15-year loan sound good for you? If so, you might have to make s few adjustments to make this work. One might include choosing a smaller, less expensive house to buy. Secondly, you might have to give up some things to afford the payments for the loan.
There are so many great reasons to choose a 15-year loan, but it is also important to make sure this is the right choice for you. To find out more, talk to a loan officer at a bank like the CommunityBank of Texas today.