There is always a debate when home buyers have to decide on the merits of 15 or 30 year fixed mortgage rates. Of course the goal for most people with a mortgage is to pay it off early and save themselves a great deal of money in interest repayments. There are always things to take into account before signing documents. One important point is to ensure that the interest rate doesn’t change during the life of the loan.
It seems that some lenders are happy to offer deals that appear too good to be true and they usually are. A 15 year fixed rate mortgage means the interest rate remains stable for the life of the loan. If you are someone that wants a loan with a regular fixed repayment and no additional charges then this is the main benefit with this type of agreement. Both my wife and I decided to research fixed rate mortgages when we started looking at homes for sale.
Although paying off the mortgage was our main priority, we did not want to have monthly payments that were uncomfortably high. This meant we had to consider 30 year fixed rate mortgage plans as well as those of 15 years. The 15 year fixed mortgage rate was the plan we really wanted because neither of us wanted to be still paying a mortgage when we close to retiring. We were worried about the emphasis placed on early completion of the mortgage.
Taking everything into account we finally went for the easier 30 year mortgage plan instead. There were many things that lead us into making this choice. The main reason was that I found out my wife was pregnant. My wife decided she wanted to raise our child at home so I couldn’t be certain of her monthly financial commitment to our household expenses. Our monthly payment would have been too high if we had committed ourselves to the 15 year fixed mortgage plan. We knew that it just wasn’t an option and the risk was too great. A thirty year loan brought the monthly payments down to a reasonable level.
We are also able to make extra payments throughout the year to make the principal shrink quicker. Those few extra payments also help reduce the number of years you have to pay the loan over.
This takes some discipline but it is well worth the effort it in the long term. Taking our needs and abilities into account was more important than our desire for a shorter term mortgage plan. In retrospect, everything worked out ok for us by going down this road.