Refinancing; Is a 15 or 30 Year Term the Best Option for You?
Lending rates are at a 60 year low and many homeowners are taking advantage of the one bright light in this tough economy. However one somewhat surprising trend that has evolved is that many borrowers are applying for 15 year refinancing loans versus the conventional 30 year loans. Given what many homeowners have been through over the past 3 years many homeowners are in the mood to have debt relief and anxious to get their mortgages paid off as quickly as possible.
15 year loans result in significant savings in terms of interest payments but require larger monthly payments than a 30 year loan. Retirement considerations also play a role, along with a desire to build equity faster. Many homeowners contemplate not wanting to refinance a 30 year loan if they are retiring in 20 years.
The best candidates to consider a 15 year loan are those homeowners who have paid down a 30 year mortgage for at least 5 years, have sufficient equity and excellent credit, are secure about their job future and have sufficient liquidly. An alternative option for those who do not have the appetite for the higher monthly payments is to accelerate their monthly payments on their 30 year loans. This option is a great compromise for many borrowers.
Considerations of a 15 year mortgage:
- You are a homeowner in half of the time
- You build equity quicker while paying significantly less in interest
- Lending rates are typically 0.5% to 1% lower
- Monthly payments are higher
- If there is a change in your income stream (loss of a job, ect), it may be difficult to make the monthly payment.
What to do???? Do not hesitate to contact Brad or Ann to determine your best options. In addition, please visit our website www.fortunefinancialgroup.com for our mortgage calculators under the research tab.