For today’s home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.
The 15-year/30-year interest rate spread is near its 5-year high.
Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.
As compared to 30-year terms, 15-year products repay 3 times as much principal each month.
Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting. The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.
Another negative is that the sheer size of the payment. If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do.
In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term. If you can manage it, though, the rewards are tangible.
At today’s rates, a 15-year fixed and 30-year fixed is $230 per $100,000 borrowed.
I would give strong consideration to the 15 year fixed over the 30 year fixed. With today’s low mortgage rates and home prices on Knoxville homes at all time lows it could be a real benefit to you down the road. The Knoxville home market will come back with stronger prices in the future. Think of it this way if you are really getting that principle down each month and prices rise. If you go to sell your home 5-7 years down the road you will have a HUGE advantage when you buy your next home. You will have a large down payment and it could put you into your next home on a 15 year note enabling you to get your home paid for quickly. Just a thought…
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