Source: usatoday.com | Re-Post Houterloot 12/6/2016 –
While a 15-year mortgage seems a bit scary because you’ll have higher monthly payments, the long-term interest savings make it a great deal if you can afford it. But it’s important to make sure you’re not overextending yourself in the hopes of paying off your loan more quickly.
A 15-year mortgage could save the average homeowners tens of thousands of dollars in interest — but it could also increase your monthly payment by 28% and keep you from meeting other financial goals. Here’s some advice on whether a 15-year mortgage is right for you and how you could make the most of one.
What is a 15-year mortgage?
Traditional home loans last for 30 years. In most cases, offering to take the shorter 15-year term comes with a better rate. It offers a chance to pay off your home more quickly and spend far less in interest.
As with any loan, a 15-year mortgage requires that a lender consider you worthy. In a broad sense, that means meeting the 28/36 rule, which has two requirements:
- A household must not spend more than 28% of its gross monthly income on complete housing expenses.
- A maximum of 36% of gross monthly income can be allocated to debts and lingering loans.
A 15-year loan may also require a little more scrutiny than a traditional 30-year mortgage, because the bank will want to be very sure you can make the higher payments.