Lenders usually offer a lower interest rate on 15-year mortgages.
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5 Tips To Afford A 15-Year Mortgage
Is It Harder to Qualify for a 15-Year Mortgage Loan? If you have a higher income that proves you can afford the higher payments associated with a short term mortgage loan, then it's easy to qualify. You may also find interest rates that are between . 5 and 1% lower than they are for a 30-year mortgage.
You can afford the monthly payments
Yes, 15-year mortgages tend to have lower interest rates than their 30-year counterparts, but because you have to pay off the balance in half the time, you wind up laying out more each month while you're making those payments.
Why it's smart to follow the 28/36% rule
Most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt — that includes housing as well as things like student loans, car expenses and credit card payments.
Is it worth refinancing for 1 percent? Refinancing for a 1 percent lower rate is often worth it. One percent is a significant rate drop, and will generate meaningful monthly savings in most cases. For example, dropping your rate 1 percent — from 3.75% to 2.75% — could save you $250 per month on a $250,000 loan.
Most homebuyers choose a 30-year fixed-rate mortgage, but a 15-year mortgage can be a good choice for some. A 30-year mortgage can make your monthly payments more affordable. While monthly payments on a 15-year mortgage are higher, the cost of the loan is less in the long run.
If you can afford the extra monthly mortgage payments, switching to a 15-year loan can be a good choice. The shorter loan usually has a lower interest rate that will result in less interest being paid over the life of the loan, though the monthly payments will be higher than they were for a 30-year loan.
What You'll Need To Qualify For A 15-Year Fixed Loan. A minimum 3% down payment. A minimum FICO® Score of 620. A debt-to-income ratio (DTI) of no more than 50%.
15-Year Fixed-Rate Mortgages
The median rate for a 15-year fixed mortgage is 2.38%, which is an increase of 1 basis point from the same time last week.
How to pay off your mortgage early
Extra payments reduce the expected life of the loan, which (other things the same) reduces the benefit from the refinance. ... If you plan to refinance into a 30-year loan, for example, but extra payments would result in payoff in 20 years, you should use 20 years as the term.
The monthly payment on a 20 year mortgage is 22.3% more than a 30 year payment, while a 15 year monthly payment is 46.2% more than a 30 year. ... This shows that a 20 year loan saves 68.6% of the interest amount that a 15 year mortgage does!
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