Is a Fifteen Year Mortgage a Good Bet
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Is a 15-Year Mortgage a Wise Choice?
When considering a 15-year mortgage, you're placing a bet on a couple of key factors. The primary gamble is your ability to manage higher monthly payments over time. If you own a business, you might have more control over your financial stability. However, you need to consider whether your business or career can maintain its success over the next 15 years. Are you in a sector that’s vulnerable to economic downturns? If so, opting for a 15-year mortgage could be risky. On the other hand, if you have a stable, salaried job, this option might be safer.
How Much Can You Save?
The savings with a 15-year mortgage are significant. Using a mortgage calculator, a $100,000 loan over 15 years might have a monthly payment of about $735, contrasting with $955 over 30 years, even with a slightly higher interest rate for the shorter term. The total interest paid is drastically different?"$169,000 for 30 years compared to just $64,000 for 15 years. However, it's important to consider the tax savings due to the higher interest payments on a 30-year loan.
Managing Your Money
Consider where your extra funds would go if not tied up in a 15-year mortgage. Could they be invested elsewhere? Probably. However, most people tend to spend this extra cash rather than save it. A 30-year mortgage might allow for better vacations, a nicer car, or simply more breathing room in your budget.
One advantage of a 15-year mortgage is debt freedom sooner, but there’s associated risk. If you want a compromise, look into mortgages that allow for accelerated payments. You can pay extra when your finances are robust, which helps reduce your principal faster while still reaping tax benefits from the higher interest of a 30-year mortgage.
The Hypothetical Debate
Some financial experts claim that a 15-year mortgage is unwise because the potential savings from a 30-year mortgage?"if saved or invested?"could outweigh the interest savings. However, the reality is that few people consistently save the difference in payment and tax deductions. Most view home appreciation as their primary return on investment. In simpler terms, if a 30-year mortgage gives you financial peace of mind, it might be the better choice.
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