Deciding a 30- vs. 15-Year Mortgage

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The right answer will depend on your circumstances, but some factors play a role in deciding which way to go. Today's record-low mortgage rates are giving
consumers the choice of two great options -- 30-year mortgages that
charge just over 4% interest or 15-year loans with rates nearly down to
3%.

The first thing to look at is the difference in monthly payments
between a 15-year mortgage and a 30-year loan of the same size. You want to look at what that 15-year payment will be and decide
if you can handle it. If you can't, that will decide it. Fifteen-year mortgages do charge lower interest rates than 30-year loans -- but carry higher monthly payments because you have to pay all principal back in half the time. 

For example, borrowing $300,000 for 15 years at 3.25%
average rate means you'll have a $2,108 monthly mortgage payment
(excluding the effect of any origination fees). That's nearly 50% higher than the $1,441 you'd pay if you take out the
same-sized loan for 30 years at 4.05% average rate (again,
ignoring origination fees).

 

You can check out your potential monthly payments by plugging in specifics from your own situation into the CHASE mortgage calculator. 

Many buyers would be well served if they opted for a 15-year
fixed-rate mortgage instead of a 30-year mortgage. A lower interest rate
and shorter term mean that you will pay considerably less for your
loan. And There’s not a single person who’s
paid off their house that has ever felt bad about it. Right? of course. The message is a
higher monthly payment, and it is sensible to weigh the value of a less
costly mortgage against other savings priorities like college,
retirement and a rainy day fund.


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