what are the advantages of a fixed 15 yr mortgage over a fixed 30 yr?

Answer 1

You're building up equity by paying off principal that much faster, thereby making a 2nd mortgage or even a complete remortgage that much easier when times get tough.

For some very wealthy people, it's always wise to never pay off the principal because the mortage interest is 100% deductible on one's tax return and subsidized by the government thereby - those types of home appreciate as such a fantastic rate that the equity is built-up entirely by appreciation in value.

For the average person with steady income and money in the bank, the 30 year (or interest only) mortage can work the same way so long as they otherwise qualify to file the Schedule A (Itemized Deductions) with their tax return.

Oftentimes, its the large home mortgage interest deduction in and of itself that pushes one into Sched A filing instead of taking the several thousand dollar standard deduction. For these people, financial advice/research is neede to see whether the longer mortage period is really of that much benefit.

Answer 2

Rates on a 15 yr fixed are generally lower than a 30. You can also get other terms. 5, 10, 20, 25 and 40 if you would like. The longer the term, the more total interest you will pay over the length of the loan. The rule of thumb on a bi-weekly loan that someone suggested is it takes roughly 8 yrs 3 months off your loan. You can get the effect of a bi-weekly by making 1 extra payment per year. You can achieve this by dividing your principal payment by 12 and sending that amount each month or you can do it in one lump sum. The larger the sum the faster the payoff.

Search "Amortization" on the internet and find a free amortization calculator and play around with the numbers.

The disadvantage of a 15 yr fixed is that your monthly payment is higher than a 30 yr. If you have the discipline, take the 30yr term and make the 15 yr payment as suggested above.

One other thing to note, you are always paying interest in arrears on a mortgage. You close and start accumulating interest. You make your first payment and you are paying interest for the 30 days that just passed. Your principal gets reduced and you now start accumulating interest on that lowered principal balance. Multiply your balance by your rate and that is your interest for the year. Just remember, with each payment, your principal goes down.

Answer 3

This is very easy Take the 30 year fixed. Make your payments based on a 15 year amortization, based on the 4.875% rate. You can use an online mortgage calculator to figure out the payment. If things don't change financially for you, you will have the loan paid in 15 years. BUT, heaven forbid, something happens and you cannot make that higher payment. At least you have the fallback of the 30 year payment, without having to worry about having a late payment, paying late fees, hurting your credit, etc...

Answer 4

You might think there's an earlier payoff, but there really isn't. You have the option to pay a 30 year as if it were a 15 year, by paying extra each month, and effectively making it a 15 year.

The real advantages are that most will have lower closing costs and annual interest rates.

Answer 5

Could not of said it better than Jo Blo above, the only disadvantage is there might be a higher interest rate. So get a 30 years fixed with no early pay off and pay the principal each month as you would a 15 year fixed.

To speed it up even more they that program were you pay every two weeks so you pay 13 payments each year and add a few bucks this will drop the debit big time.

At 30 years just adding one dollar each month will shorten your loan by like two and half years.

Answer 6

With a 15 year mortgage you will pay somewhat more per month. However you will pay it for half the time. And you will pay significantly less total interest over the life of the loan.

Answer 7

You pay less interest, get a lower interest rate than a 30, and you pay off your ,mortgage faster.

Answer 8

mortgage is paid off in half the time with way way less interest paid

Answer 9

You end up paying much less for teh property if paying it off is your goal. You save more then half, it is a huge savings.