Advantages Of A 15 Year Mortgage Loan Rate
15 year mortgage rate would generally be a fixed rate home loan and may be described
as a kind of mortgage where the time period of repayment of the loan amount would be 15 years. This type of mortgage offers the security of a fixed rate loan and can lead to significant interest savings when compared to 30 year and 20 year home mortgages. Though the monthly payments may seem to be high, the overall amount paid over the time period of 15 years towards interest may be significantly lesser than what would have been paid over a period of 20 or 30 years. The monthly payments may also be significantly lower than those of a 10 year mortgage as the term period would be comparatively drawn out. Since the payment term is half of the general 30 year term, it would enable one to own the property 15 years earlier than one would with a fully amortized 30 year loan. Let it be assumed that Mr. Wilbur Smith availed a 15 year mortgage at the age of 30 and his current age is 40. This mortgage would amortize in the next five years and Mr. Smith would own the house when he turns 45. That means he would be able to own a house 15 years earlier than when he would have been able to do with a 30 year fixed rate mortgage.
Though a 15 year
mortgage
rate loan may mean higher payments, it may not be correct to consider that the monthly payments due would be double those for a 30 year loan. In fact it may be beneficial to pay a higher amount as it would help streamline ones budget and may also help in saving money. It may be noted that generally the fixed rate of interest for a 15 year loan may be significantly lower than a fixed rate 30 year loan. The down side though to this type of loan would be that it might put a pressure on ones budget as minimum amount due payments would be significantly higher and there may not be much in terms of savings that may be invested wisely.
30 year mortgage loans on other hand might be the most popular and commonly sought after loans. 30 year mortgages enable a borrower to spread their payments out over a 360 month period while offering the security of a fixed rate loan. And with most 30 year mortgages, one may make additional payments every month without incurring a penalty thus paying off the loan well in advance of the 30 year term. Some of the reasons one might be interested in a 30 year mortgage could be because fixed rate mortgage with payments spread out over a 30 year period might be predictable and would be easy for budgeting ones finances. It might offer some flexibility in that borrowers might be able to typically pay down their mortgages faster by electing to make additional principal payments. 30 year interest rates might be lower than the other term mortgages and this might make the offer very attractive to borrowers.
The home
loan rates are of two basic types. Fixed rate and adjustable rate mortgage (ARM) are the usually offered loans based on the way the interest would be charged on the loans advanced. In a fixed rate mortgage, the rate of interest remains constant throughout the time period of the loan whereas in ARM, the rate of interest paid on the principal amount changes according to the rate of interest currently prevalent in the market. 15 year fixed and 30 year fixed mortgage loans might be the most sought after fixed interest rate loans with fixed terms. The advantage of a fixed rate mortgage would be in that the monthly payments would remain constant while in the case of ARM, the payments would either fluctuate or the time period of the loan repayment might get extended or reduced depending on the open market rates.
by: Ask Bill
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