For home buyers and homeowners that can manage the higher monthly payments, 15 year fixed rate mortgages look attractive as compared to 30 year rates
The 15-year/30-year interest rate spread is near a 5 year high.
Despite lower rates, however, homeowners opting for a 15 year fixed mortgage should be prepared for its higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30 year amortizing product.
As compared to 30 year terms, 15 year products repay 3 times as much principal each month.
There are a few downsides to the 15 year. Because 15 year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.
Another negative is the larger monthly payment. If you run into financial trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30 year product and that costs money.
In other words, be sure you can manage the payments over the long-term before you opt for a 15 year term. If you can manage it, though, the rewards are tangible.
Today’s 15 yr fixed with no pts and no origination fee is 4.25%.
Posted by Scott Fowler. Scott can be reached @ 864-527-8900 x 104 or email SFowler@HorizonFinancial.org. Visit Scott’s website @ www.ScottFowlerTeam.com.
