Tips On Applying For A 15 Year Mortgage

A 15 year mortgage is one option you may not be aware of when buying a home.

Because of the large amount of money needed to buy a house, not very many people are able to pay cash up front. The most common way to deal with this is to get pre-approved for a loan. A bank will determine how much they're willing to lend you based on how much income you have and what they think you can afford.

You have to decide how much money you can come up with for a down payment and the rest will be your monthly mortgage payments. The larger your down payment, the less you will have to borrow and the sooner you will own your home. You will also end up paying much less interest if you have a big down payment, so it's really to your benefit to save up quite a bit before applying for a mortgage. This then, is how the budget will be decided for your purchase.

People usually choose the typical 30 year mortgage and end up selling before the house is completely paid off, because not very many folks stay in one place for that long.

Another option that's becoming more popular is a 15 year mortgage, meaning if you meet your monthly payments in a timely manner for 15 years, then you'll have paid it off and will own your home. You will, of course, have much larger monthly payments than if you spread it out over 30 years, but will also save quite bit in interest since you'll be paying the loan back twice as fast.

If you decide to move and want to sell your property, you'll be in a much better position. Homes gain value fairly quickly compared to other investments and you could make a lot more money because you won't have the loan to pay off. This is a very attractive proposition for a lot of people because you can build up equity and credit much more quickly. It makes a lot of sense and is why many consider taking this route.

A 15 Year Mortgage Is Not for Everyone

You really need to think about something like this however, because you could get in way over your head. If you don't have a lot of extra income then the large monthly mortgage payments might become difficult for you to keep up with.

It might be safer to go with a regular 30 year mortgage because you still have the option to shell out more each month and pay your debt off quicker. This way you still save money from interest without the added risk of not being able to make your monthly payments. There's really no reason why you can't pay back your loan as quickly as you choose to.

Also, you may want to save the money that would be going towards the larger payments as a safety net for any unexpected expenses that pop up. 15 years is still quite a while and many things could happen to change your situation in that amount of time.

Another reason you might not want to commit to a 15 year mortgage is that there's a chance it could wind up being harder to get out of, if for some reason you need to do this. In addition it seems that many 15 year mortgages are not done at fixed rates, so you might end up paying much more than you expected. This is because the interest rate can change whenever the bank decides they need to due to market fluctuations.

In the end, if you're really serious about buying a home you should consult a loan officer. Their job is to help you find out what you can actually afford and how it will affect your way of living. You definitely don't want to spend too much and end up having to choose between paying your mortgage or buying groceries.

A consultant will also be knowledgeable of certain things that can save you quite a bit of money such as incentives or deals that you might qualify for.

There's a ton of books out there as well, written especially for people who are looking to buy a home. You can probably even find a calculator online which can show you how much you'll actually end up paying for a 15 year mortgage after interest and taxes.