1. Can you afford to pay off the mortgage in 15 years?
Although a 15-year mortgage offers a lower rate relative to a 30-year mortgage, thereby allowing borrowers to pay interest for only half as long, a 15-year mortgage comes with a higher total monthly payment. This is because the principal must be paid off faster, making each principal payment larger.
Because borrowers pay down the principal balance faster, in the longer run they save on interest payments. Inside Mortgage Finance publisher Guy Cecala noted, “if you can afford the higher payments associated with the shorter-term 15-year mortgage, there is no reason not to take one.”
However, because the monthly payments are higher, it can strain borrowers’ ability to set aside money for retirement or their kids’ college tuition. These borrowers may be better-off with a 30-year mortgage. Similarly, if the higher payments of a 15-year mortgage mean borrowers have…
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