Whether you are thinking about applying for a refinance loan soon or you are in the market to buy a new home with a mortgage, you may be drawn to fixed-rate loan products. A fixed-rate loan enables you to establish the same monthly payment throughout the life of the loan. This enables you to more easily manage your budget over the years. However, before you can formally apply for your next home mortgage, you need to decide between a 15-year fixed and a 30-year fixed program.
One of the most significant benefits of a 30-year fixed-rate mortgage is the lower monthly payments. Essentially, you are paying off the principal balance at twice the length of a 15-year fixed-rate loan, so the payments will naturally be smaller. This holds true even though a 30-year fixed-rate loan may come with a slightly higher interest rate. Because the monthly loan payment is smaller, you may be able to qualify for more home if you apply for a 30-year fixed-rate loan. If your DTI ratio is tight, this could be the only option that you qualify for.
On the other hand, while the payment with a 15-year fixed-rate mortgage may be higher, this is the more affordable option overall. This is because the amount of interest that you will accrue over 15 years will be dramatically lower than what you would accrue with a 30-year fixed-rate mortgage. In addition, you will accrue equity at a much faster rate and will own your home outright much sooner than you otherwise would with a longer term.
You can see that there are many advantages and drawbacks to both 15-year and 30-year fixed-rate mortgages. There is no option that is clearly superior to all applicants, but there may be a superior option based on your unique preferences and situation. You can request a quote and an amortization schedule for both options when you apply with MortgageDepot. Which this information in hand, you can make a decision that is best for you.
Contact one of our loan consultants to learn more.