If you are getting ready to buy a house, one of the decisions you might be tossing around is whether to get a 15-year loan or a 30-year loan. There are several big differences in these loan options, but the main factor you will need to consider is if you can afford the payments on a 15-year loan. If you can afford the payments, you will benefit in two main ways by choosing a loan that lasts only 15 years.
You will pay a lot less interest
The main benefit with a 15-year loan is that it allows you to own your home outright in only 15 years, but this is not the only good part about these loans. A key benefit of choosing a loan that is shorter in time is the amount of money you will save on interest. Here is an example of how this works with a 15-year loan and a 30-year loan that both have a 5% interest and a loan of $150,000:
As you compare these options, you will notice that a 15-year loan has a payment that is approximately $393 more per month; however, you will pay almost $60,000 less in all on this home purchase.
This might allow you to retire earlier
15-year loans are also a better option for people that are over 40 years old, because these payers do not have as much time before retirement. If you are around this age and want to make sure you can retire by your early 60s, choosing a 15-year loan would make this easier.
If you take the loan at the age of 40, it would be paid off by the time you were 55. This would still give you some time to save extra money for your retirement. If you instead chose a 30-year loan, it would not be paid off until you were 70 years old, and this could make it harder for you to retire at the age you hoped for.
If you would like to learn more about the options you have, talk to a lender that offers home loans like MCS Bank. You can find out more about both types of loans, and this may help you determine which is right for you.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.