Which Home Loan Is Best for You?
The economic downturn hit the real estate market, leaving many prospective buyers feeling reticent and fearful. In recent months, things have been looking up, with increased demand driving property values higher.
As more and more people begin shopping for new homes, local lenders are seeing increased demand for new mortgage loans . Usually, these come in the form of 30-year plans; however, because current mortgage rates remain extremely low, more and more people are choosing 15-year plans. To understand why, it helps to know the benefits associated with both types of loans.
The benefits of a 15-year plan
Ultimately, because they allow borrowers to secure lower interest rates, 15-year mortgage loans are cheaper than traditional 30-year plans. If they maintain consistent payments each and every month, borrowers with 15-year mortgages can save thousands of dollars over the life of a home loan, when compared to those who choose to pay over three decades.
The benefits of a 30-year plan
Although 15-year plans can save borrowers a bundle in interest charges; they require a large monthly financial commitment. Obviously, because short-term loans require you pay off your mortgage quicker; they demand larger monthly payments. These may prove unwieldy for borrowers who maintain strict budgets or relatively low incomes. In the end, although a 15-year plan may be a cheaper option in the long-term, it’s not always a realistic option for the typical homebuyer.
Why a 30-year loan may be better
For most people, 30-year loans make the most sense, because they offer more flexibility. Let’s face it: few of us enjoy guaranteed job security. If you have a 15-year mortgage and suddenly find yourself out of work, you may be faced with unmanageable bills that could force you into a very real bind. On the other hand, if you have a 30-year loan, you will be better positioned to cope with this type of financial emergency.