A 15 Year mortgage typically allows a buyer to make half as many mortgage payments and owe thousands less in interest over the life of a loan, all while paying a lower interest rate. A 15-year mortgage can make good sense for your situation — if you’re looking at real estate anywhere in Nashville, TN! Here’s why you should consider this type of mortgage with a shorter payment term.
15 Year Mortgage in Nashville
Like all mortgage products, the best time to get a 15 year is when interest rates and fees are low. Interest rates are affected by a few different factors. The main factor which affects rates is supply and demand. Supply and demand is a basic economic principle which affects almost all everything in a free market economy. In a good economy, interest rates tend to be higher because more people can afford to purchase a home and the demand increases. In a poor economy, rates tend to be lower because less people are looking to purchase a home which leads to a lower overall demand.
There are many benefits of selecting a 15 year loan. Some of the main benefits are:
Low Interest Rate – As mentioned earlier, a 15 year normally comes with an interest rate of .50% to .75% lower than a 30 year rate. Coupled with the fact that the loan is paid off much quicker, a 15 year will save a borrower thousands of dollars each year in interest payments. Over the course of a $200,000 loan, a borrower will save $147,000 by selecting a 15 year over a 30 year.
Build Equity Quickly – Another benefit of selecting a 15 year is that a homeowner will build home equity much quicker than someone who selects a 30 year. Assuming a $200,000 loan with interest rates of 6% for a 30 year and 5.25% for a 15 year, after just five years a borrower with a 15 year will have $35,000 more equity in their home than a person with a 30-year. After the 15 years, a person with a 30 year will still have $144,000 pinciple balance left.
Fixed Payment – Another benefit of a selecting a 15 year is that the borrower will have a fixed payment for the life of the term. Because of this, a borrower will be assured that their payment will never adjust dramatically and they will always have an affordable payment.
As with all loans, though, look out for sneaky fees in the way of points and balloon payments!
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