Housing/Shelter is one of the basic necessities, that human beings need to survive in this tough world. Asides from food and clothing, a man must have a roof over his head. Needless to say, most people who buy homes can’t pay for them outright and instead finance them by getting a mortgage. According to the Oxford Advanced Learners Dictionary, a mortgage is a special form of secured loan where the purpose of the loan must be specified to the lender, to purchase assets that must be fixed property, such as a house or piece of farmland. The assets are registered as the legal property of the borrower but the lender can seize them and dispose of them if they are not satisfied with the manner in which the repayment of the loan is conducted by the borrower. Once the loan is fully repaid, the lender loses this right of seizure and the assets are then deemed to be unencumbered.
The 30-year mortgage is popular among purchasers because it amortizes the cost of a massive loan over 30 years, making monthly payments more manageable. However, while purchasing a property, you are not required to obtain a 30-year mortgage. You can also get a 15-year mortgage to reduce your payback time. Because the interest paid on a 15-year mortgage is lower than a 30-year mortgage, a house buyer can save a lot of money over the life of the loan. Apart from that, a 15-year mortgage comes with a slew of other benefits.
To begin with, you’ll save a significant amount of money on interest over the course of the loan. When you get a mortgage, you pay your creditor interest on the loan. You’re borrowing money for half as long with a 15-year mortgage as you would with a 30-year mortgage, resulting in reduced total interest rates. Consider a $200,000 loan with a 4% interest rate. You’d pay $143,739 in interest over the course of a 30-year mortgage. You’d pay just $66,288 in interest over 15 years with a 15-year mortgage. That is a significant amount of money saved. A 15-year mortgage often comes with a lower interest rate since short-term loans are less problematic and less expensive for banks to fund than long-term loans. The rate can be a quarter to a whole point lower than a 30-year mortgage.
A 15-year mortgage will also allow you to accumulate equity more quickly. The phrase “equity” refers to the percentage of your home that you own after paying for it. By deducting your outstanding mortgage balance from the market value of the property, you may calculate your cash value. If your house is worth $300,000 but you owe $240,000 on the mortgage, you have $60,000 in equity, or 20% equity. When you pay off your mortgage in half the time, your monthly payments are higher, meaning more money goes toward the capital of your loan. As a result, you reduce your mortgage balance and build wealth faster. The sooner you pay off your mortgage, the more money you’ll have to put toward other expenses. This is especially important if you are purchasing property later in life. It’s normally a good idea to pay off your mortgage by the time you retire because while you’re on a fixed income, you’ll want as little bills as possible eating up your limited earnings.
As advantageous as a 15- year mortgage is, it might just not be right for you. There are many positive reasons to seek a 15-year mortgage, but you should be aware that you’ll be stuck with increased monthly payments for the term of the loan. Because the loan must be paid off in a shorter time, a 15-year mortgage has a larger monthly payment than a 30-year. A 15-year loan for $250,000 at 4% interest, for example, has a monthly payment of $1,849 compared to $1,194 for a 30-year loan. In other words, for the same amount at the same rate, the 15-year monthly payment is 55% greater than the 30-year payment. This could put you under a lot of financial strain, as well as leave you with less money to spend on other things at that period. So, you better start investing whether crypto investment and traditional investment nothing matters as long as you have one.