If you’re planning to buy a home in Albuquerque and can afford a higher payment, then a 15-year mortgage is an ideal way to pay off your mortgage faster and save thousands of dollars in interest. Of course, to make it work you need to have enough income to cover the payments, along with your other expenses. Despite the advantages of a 15-year mortgage, many home buyers tend to stay away from them when they realize the payments are about 50% higher than a 30-year mortgage.
As with any mortgage, there’s pros and cons. What are the pros and cons of a 15-year mortgage?
- Owning your home faster. Knowing that your home is paid off gives you security.
- Builds equity. Since you’re paying off the principal balance faster, you can build more equity.
- Save money. 15-year loans have a lower interest rate, since there’s fewer years of risk for the lender. You also save money on interest because the loan term is shorter.
- Higher payments. You have to make sure that you can handle the higher payment, along with taxes and other expenses for the entire 15-year term.
- Locked up equity. The equity you’re building is locked up in the home. The only way to use it is to sell the home or refinancing.
- Missing other opportunities. Higher payments means you may not have enough money to take advantage of other financial opportunities, such as investments or matching your employers contribution to a retirement account.
- Lower quality home. Since you aren’t stretching your payments over 30-years, you won’t qualify for as high of an amount as you would with a 30-year loan.
To sum up, a 15-year loan is an ideal way for those who can afford the higher payments to save money and own their home more quickly. But if you’re not entirely sure your finances are stable, then you should avoid a 15-year mortgage.