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15-Year Fixed Mortgage

A 15-year fixed rate mortgage is a Florida home loan whereby the interest rate and monthly payment are fixed throughout the term of the loan. Essentially, it has the same attributes as a 30-year loans but for only half the time. The 15-year fixed rate mortgage saves a significant amount of interest, while speeding up equity value in the home. Also, the rate for the 15-year fixed mortgage is at a lower interest that may be as a much as a full percentage point lower. This is an incentive that lenders offer when they can reduce their risk of loan default.

The Advantages of a 15-year Fixed Rate Mortgage

The benefits of a 15-year fixed rate mortgage versus a 30-year term are fairly obvious. Both have fixed rates and fixed payments over the life of the loan. The 15-year fixed is only half the time to have the loan paid in full. Other clear advantages include:

  • A Smaller Amount in Total Interest
    A 15-year fixed rate mortgage costs less in the long run since the total amount of interest payments are less than a 30-year mortgage. The cost of a mortgage is centered on an annual interest rate, and since the loan is for half as long, the total interest paid will likely be about half the 30-year fixed rate cost.
  • Lower Interest Rate
    Since short-term loans are less uncertain and more inexpensive for lenders to fund than long-term loans, a 15-year fixed rate loan normally comes with a lower interest rate. The rate can be anywhere between a quarter point to a full point less than the 30-year fixed mortgage rate.
  • 15-year Fixed Mortgage is Like a Built-in Savings Program
    Since the monthly payment is higher for a 15-year mortgage (interest is lower and principal is higher), financial advisors consider it a type of forced savings program. In other words, instead of taking the monthly savings from doing a 30-year fixed mortgage and investing the monies in a mutual fund, you'd be investing it in your house, which typically increase in value over time.

The Drawbacks of a 15-year Fixed Rate Home Loan

Despite the interest saved with a 15-year mortgage, there are a few considerations and disadvantages that borrowers should think about before deciding on the term of their loan. Remember, what may be advantageous for one family, may not be feasible for another.

  • Increased Monthly Payments
    A 15-year mortgage has a higher monthly payment than a 30-year fixed rate since the loan is completed in half the time. For example, a 15-year loan for $160,000 at 3.5% interest has a monthly payment of $1,144 versus $718 for the 30-year. In other words, the 15-year monthly payment is 59% higher than the 30-year for the same amount at the same interest rate.
  • Not Everyone Can Afford Higher Mortgage Payments
    A higher mortgage payment might restrict the buyer to a smaller home than they would be able to buy with a 30-year home loan. While this comes with certain variables like debt-to-income ratios or monthly mortgage payment limits, the buyer can typically buy more home when the Florida mortgage payments are spread out over a longer period of time. Of course, the trade-off is an increased interest rate and substantially higher total interest paid. Its just a matter of what fits best for the buyer given their financial position at the time they are closing the loan. However, as financial market conditions or your personal financial situation improve, then you can always refinance. Your Fidelity Home Loan advisor will tell you when the time is right to refinance.

Is a Florida 15-Year Fixed Mortgage Right for Me?

The choice between a 30-year or 15-year mortgage is one that will affect your financial situation for years to come, so be sure to weigh the pros and cons of each before determining which is best. If your goal is to pay off the mortgage note sooner and you can afford higher monthly payments, a 15-year fixed rate loan might be the best option. On the other hand, the 30-year option may allow you to buy a bigger house or free up cash for other important financial goals.

Related Links
30-Year Fixed Mortgage
Adjustable Rate Mortgage
FHA & VA Loans
Jumbo Mortgages

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