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A standard 15 year mortgage has term of 180 months.Most 15 year term mortgage products have lower interest rates than a 30 year mortgage. The reason why mortgage lenders offer lower rates is that it less of a risk (because of the shorter payoff time). There may also be more capital to lend because many mortgage investors prefer to get a faster return on investment ( 15 year return as opposed to a 30 year return). TIP - Be careful when shopping rates and mortgages, the rate, on a 15 year mortgage, may sound more attractive than the longer term loan mortgage rate but compare the payments and understand that they will be dramatically higher on the 15 year. Example of a 15 yr vs a 30 yr termed home loan:A 15 year $210,00 mortgage principle and interest versus a 30 year $210,000 If the going rate on the 30 year mortgage is 6.25% then the rates on the 15 year will tend to be 3/7 of a percent lower. So we will use the rates of 6.25 and 5.5 for the example P&I. 15 year term rate 5.5 P&I = $1715 30 year term rate 6.25 P&I =$ 1293 So as can be seen in the example above the rate on the 15 year mortgage might seem more attractive but the payment are dramatically higher.The majority of borrowers who get the 15 year loan are interested in paying off the loan as soon as possible. They are also using it to refinance after they have gained at least 20% equity in the home (refinancing at that LTV, 80%, will usually remove mortgage insurance). If you believe you will sell the home within several years it may be a better idea to get the longer term rate mortgage and use the monthly savings to send into the mortgage lender as monthly "extra principle" payment. This way the higher payment on the 15 year mortgage becomes optional as opposed to required . The extra principle payment will shorten the total length of the 30 year mortgage. Why do this? If there is a tight month on income you can avoid the higher monthly expense and not send in the extra. Utilizing this web site is agreement to our privacy policy. This is not an advertisement for credit as defined by paragraph 226.24 of regulation Z. There is no Mortgage rate guarantee for all applicants . information is not intended to be used as investment advice. Please contact a competent and well qualified loan officer by submitting an Bad Credit mortgage quote request online in order to get up to date and pertinent bad credit mortgage information.
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