With mortgage rates still at historical lows, financing – or even refinancing – a home can be enticing. When it comes to borrowing money for a home, many people automatically default to a 30-year mortgage – primarily because the payments are stretched out for a longer period of time, which can equate to a lower dollar amount that is due each month.
But is a 30-year mortgage really the best option in times like these?
The answer is it depends.
One of the first questions you need to ask yourself is how long you plan on staying in the home. The next is how much will you actually end up paying in total. For instance, even though the payments on a 30-year mortgage can be lower, and in turn, more affordable, over the long-term, the overall cost of the home will be much less with the 15-year option.
In fact, in many cases, over the full life of a loan, the 15-year option could be less than half the cost of the 30-year mortgage. This is due in large part to the lower amount of risk that the lender is taking on, and the corresponding lower interest rate.
With that in mind, before committing to any type of home loan, it is important to do your homework and consider the total cost of your alternatives. Certainly, other costs that could also factor into your monthly mortgage payment include property taxes, homeowner’s insurance, and possibly private mortgage insurance (which is usually charged if your down payment is less than 20% of the price of the home).
If you’re considering the purchase of a home, we can help. The real estate market has been booming over the past several months – and if you have a property to sell, now could be a great time to do so, and to find the next home of your dreams! So, contact us today to learn more.