Which Loan Is Best For You – 15 or 30 Years?

Which Mortgage Should I Purchase?

A 30-year mortgage financing loan has been the quite popular for customers buying a house, although another loan is gaining popularity. The 15-year mortgage loan, due to the record-low interest rates available nationally, are increasing among home buyers.

Consumers are now turning towards 15-year loans due to the fact of their massive affordability since 2010. Statistics from the Mortgage Bankers Association have shown that a 15-year loan recently accounted for 23% of refinancing applications in November of 2012. This has risen 51% from a year earlier. For the entire year, 15-year mortgages made up 35% of all refinance loans.

How Affordable are 15-Year Loans?

Rates are becoming more and more affordable for a 15-year loan, so many home buyers do not mind the increased monthly payment because of the total amount that they are saving during the full 15 years. In general, consumers are saving themselves tens of the thousands of dollars in interest over the life of the loan vs. the life of a 30-year loan.

Displayed in the chart below, you will see how the 15 year mortgage loan illustrates the savings generated vs the traditional 30-year one. On a median priced home of $366,930 in California, a homeowner could potentially save up to $117,000. Figure 1 breaks down payment and interest schedule for the two types of loans.

15-year-mortgage-rate-Vs-30-year-mortgage-rate

The saving amount, displayed in the chart, is the result of the historically low rates, which are also relatively lower for 15-year loans. While the mortgage rates will not continue to stay this low, as Frank Nothaft, chief economist at Freddie Mac, said “a 15-year fixed is three-quarters of a percentage point even lower…. You can lock that in and never have to worry about refinancing again.”

If you are looking to lock in a good lower mortgage-rate, come speak to an agent at Keller Williams Southwest  in Sugar Land, Texas about the ideal way to purchase, sell and move homes today!

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Posted on March 6, 2013, in Real Estate and tagged , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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