Times are great for current homeowners who still have mortgage payments left. Low interest rates are making it easier for owners to lessen their mortgage payoff times considerably.
This is due to the lowest rates observed on a 15-year rate loan which averaged 2.97% across the nation and was the lowest that has been since a long time. Even the 30 year loan rate was at record level low capping at 3.75% nationwide.
Shorter loan terms might translate to higher monthly payments but that is offset by clocking in lower rates. Keep on reading to understand more benefits of shortening your mortgage.
- Pay off your mortgage Faster. One of the biggest advantages that a 15-year mortgage term holds is that you can pay off your home debt more quickly compared to a 30-year plan. This option is optimal for those who don’t want to keep dishing out mortgage payments. Mortgage obligations are a huge cash outflow for any household and paying it off frees capital to be spent on other items such as that vacation you had always been planning, saving for retirement or even working fewer hours and spending more time with the family.
- Saving money on interest. If you have ever dealt with taking out any loan, you probably understand the way interest works and how quickly it can accumulate. Elements such as credit score, payment history and the size of down payment all affect the interest rate on a mortgage. However, by opting for a shorter mortgage term, you pay less in interest; therefore opting for a 15-year loan over a 30-year mortgage actually ends up costing you less in the long term. In practical terms, if you buy a property with a 15-year mortgage at a rate of 4% for $200K, your total interest bill would be $66,288. However, if you opt for the same amount of principal with the same rate but a 30-year plan, it will set you back a whopping $143,739!
- Build equity faster. Home equity is the difference between the value of your house and what you owe to your mortgage lender. Home equity is accumulated as you pay off your mortgage or if the value of your home increases. By opting for a 30-year plan, homeowners build equity much slower as it takes longer for the principal amount to be paid off.
A Mortgage lender can advise on the best terms most suitable for your financial situation. If you want an instant quick quote, visit e-finance mortgage website or call (844) 433-4626.