Pop quiz: Would you like 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? If you answered “yes” to any part of that question, 15-year mortgages are worth considering, suggests Justin Arnold, a CFP (Certified Financial Planner) who runs WashPark Capital in Denver, CO. We agree! A 15-year mortgage can make good sense for your situation — and they’re more affordable than ever. If you’re looking at real estate anywhere from Seattle, WA, to homes for sale in Boston, MA, here’s why you should consider this type of mortgage with a shorter payment term.
These are some strong reasons to check out this type of home loan. But how do you decide whether a 15-year mortgage is right for you? Jason Reiman, a financial planner who founded Get Financially Fit!, explains that the best candidate for this type of mortgage is someone who has a strong, consistent, and possibly increasing income to handle the larger monthly payment. He says that people who already have extra cash available at the end of each month — meaning they don’t have consumer debt and already save and invest — can also consider this option.
Financial planner Hermes Conesa points out that even if you have a good income now, it’s important to think about the future before you leap into a 15-year mortgage. “Remember to keep any future goals in mind,” he advises. “Getting married, having children, or any other life event or big purchase that you plan for in the future [on top of the mortgage payment] could cause your budget to feel tight.”
Ready to take advantage of a home loan with a shorter payment term? Here’s what you need to better your chances of receiving approval:
- A good credit score. (Here’s why that matters.)
- A low debt-to-income ratio.
- Enough income to afford the monthly payment (and therefore be able to show that you can reasonably afford to repay the loan in full).
You’ll also want to take a hard look at your budget and make sure you can handle the monthly payments — including the insurance and taxes on the property. If your cash flow can handle the 15-year mortgage and you’re committed to paying off your home loan in that period, the 15-year mortgage is a great option to be debt-free sooner and save money.