The world of mortgages is one of balancing acts. It’s a constant battle to weigh loan terms, interest rates, and monthly payments to find a scenario that works for you and your wallet. The idea of a 15-year mortgage sounds preferable over the traditional 30-year fixed-rate, and it can be a viable option. But first, it’s important to understand the ins and outs of 15 year mortgage rates in PA.
What is a 15-Year Mortgage Anyway?
Put simply, a 15-year mortgage is a home loan that is completely paid off in 15 years, assuming that payments are made on time. It’s an accelerated loan term intended to reduce the accrued total interest you pay on your loan. Most 15-year mortgages are fixed-rate, meaning your interest and principal remain the same for the loan’s duration. While 15-year is an enticing option, it should be noted there are specific circumstances that this option will favor more than others.
The Pros and Cons of a 15-Year Mortgage s
It’s not a stretch to say that 15-year mortgages are much less common than 30-year mortgages. But that doesn’t mean they can’t be a viable option, there are just pros and cons to be aware of. Here’s some to keep in mind.
Pro: You Pay Less In Total
While the price of the home itself may remain the same in both loan scenarios, the abbreviated loan term with a 15-year mortgage means that in total, you end up paying less. This is because of interest. Lenders typically offer lower interest rates on 15-year loans because they’re exposed to less risk. So not only does the interest accrue for a shorter period of time, it often comes at a lower rate. This saves you more money over time.
Con: Larger Monthly Payments
Because the loan term is accelerated, monthly payments are more consolidated, and thus, more expensive. In fact, it’s estimated that the payments for 15-year mortgage rates in PA, and across the country, are on average 38% higher than the same loan amount for a 30-year mortgage term. If you’re seeking a 15-year mortgage loan, you need to have the financial security to mee these higher monthly payments.
Pro: Build Equity Faster
Equity is one of the most successful methods of long-term wealth creation. And 15-year loan terms allow you to cut in line and build equity even faster. Because you’re paying less interest and completing higher monthly payments, you’re working down the principal amount faster, which is how equity is built for homeowners.
Con: Lack of Available Capital
Higher monthly payments can create a lot of difficulties. One aspect not considered at first is how these payments may dictate your financial situations. You may have less cash to invest, put into retirement, and utilize for home renovation. It’s an important consideration to have when surveying 15 year mortgage rates in PA.
Is a 15-Year Mortgage Right for You?
A 15-year mortgage rate has its value and can be the perfect choice for certain buyers. If a 15-year mortgage is an option you’d like to explore in Pennsylvania, don’t hesitate to contact the Federal Hill Mortgage team. As the top-ranked loan originators on the East Coast, our team can help you explore the loan options that will work right for your financial situation.