The 15-Year Mortgage Option

The 15-year mortgage has been around for a while now. A new article in Time magazine examines the potential advantages of choosing a 15-year mortgage instead of the more traditional 30-year mortgage.

Anyone who has had experience with mortgages probably knows about the advantages of the 15-year mortgage – the most obvious being that you pay your home off in half the time. What may not be quite as obvious is the savings you would enjoy in interest payments.

The article points out that a 30-year mortgage for $500,000 at 4.09 percent (the current rate) would result in the borrower paying a total of $368,713 in interest. Kind of takes your breath away a bit doesn’t it?

In contrast a 15-year mortgage for $500,000 at 3.30 percent (the current rate) would result in the borrower paying a total of $134,591 in interest. Now that’s a very significant savings!

The downside to the 15-year mortgage is that your payments will be higher than they would be with a 30-year mortgage. That’s obviously a huge consideration for a lot of people.

I’ve been through a mortgage or two in my lifetime and never really felt comfortable enough to go with a 15-year mortgage. I guess I was a bit mired in tradition as well. It seems as if the 30-year mortgage has been the “standard” for so long and just seemed like what people have been doing forever.

I’ve changed my stance a bit now that I’m on the downside of the half-century mark and the idea of ever taking out a 30-year mortgage at this stage of my life seems absurd. I’d be in my eighties (if I live that long) before I got the mortgage paid off! And if I did live that long, it’s hard to imagine that I’d have more than a few short years to enjoy genuine home ownership.

There’s no question in my mind that I’d opt for the 15-year mortgage if at all possible if I ever take out another one in my life. Being in my sixties when it was paid off sounds much more attractive to me than the alternative.

Still, someone opting for a 15-year mortgage should have a high level of confidence that they will be able to make the payments. You don’t want to find yourself in over your head some day simply because you thought you’d be making more money down the road than you are now. Good old “thought” has caused an awful lot of trouble for an awful lot of people whose plans didn’t quite work out the way they had hoped. With the economy the way it is now, it seems harder to be sure of future financial well-being than it has been for quite some time.

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