Traditionally mortgages are offered with either a 15 year or a 30 year term. A good majority of home buyers opt for the 30 year mortgage because payments are lower and there is a lot more time to pay off your mortgage debt. Even financial experts recommend home buyers opt for a 30 year mortgage to keep cash from getting tied up in mortgages for such a long period of time.

Record Low Considerations

While 30 year mortgages may be the norm, the current trend of record low interest rates may be a reason to reconsider your options. If you are a good candidate for the lowest available interest, meaning you have excellent credit and your debt-to-income ratio is sufficient for lender requirements, a 15 year mortgage may be the right choice for you.

Benefits of a 15 Year Mortgage

With a low interest rate, your mortgage payment will be higher than with a 30 year mortgage but may still be reasonable. You will also have the advantage of paying off your mortgage debts sooner. This, in the big picture, will save you thousands or hundreds of thousands of dollars over the full course of your loan depending on the loan amount.

You also will have the advantage of building up your home equity in a faster period of time. Since your higher payments are going toward more of your principal balance, you are increasing your stake in your home’s equity much faster than with a 30 year mortgage.

A 15 year mortgage also gives you the distinct advantage of being an official homeowner in much less time. This may prove essential in years to come. Those considering a 15 year mortgage now will also benefit from paying off a mortgage before the time comes to retire. Without a mortgage payment to be made, retirees will have more cash to allocate to other expenses. Living mortgage-free can help even meager retirement fund stretch further.

When 15 Years Doesn’t Make Sense

You may want to gain equity quickly and be done making a mortgage payment as soon as possible but if you don’t have the cash to back it up, you may be setting yourself up for disaster. Consumers today do not save enough cash as it is so if you think you can just make a 15-year mortgage payment but not have much of your income left over to stash away, a shorter mortgage term is not for you.

A number of things can occur unexpectedly and unless you are independently wealthy and out of pocket expenses will not damage you, you need to have a savings plan in place, not only to cover your mortgage and other expense but also for your future. The money you may save over the course of the loan does look great but if you can’t get by in day-to-day life paying higher payments, you should consider going with a 30 year mortgage. At a later point in time, when you are more financially stable, you can always refinance for a shorter term.