A standard 30-year mortgage is often easier to qualify for since your payments are lower, but in the long run you’re going to pay a lot more interest to your lender. If that’s all you can qualify for, take it because you can still shorten the duration of your loan by paying extra money toward the principle when you can afford to. Always ask if there are any prepayment penalties. These clauses prevent you from accelerating your mortgage, or rather paying it off faster than the lender wants without paying a penalty. Most of these clauses have been outlawed but they do exist. After all, if you sold your house before the 30 years were up, they could penalize you for early repayment. That clause was and is a bad deal. Don’t accept it!
The 15-year mortgage saves you 15 years of payments but it takes more income to qualify for it and your monthly payments are higher, and unlike the 30-year mortgage, you can’t extend it by paying less. You must make your payments as agreed. Usually you will get 1/8 of a percentage point lower on your interest rate because the lender has the shorter period of risk exposure of 15 years, not 30.
Read other articles from
Getting Started in Real Estate series by
Dan Auito