Sometimes a 30 Year Fixed Rate Mortgage is Smart
There is a constant debate over the ills of taking a one type of mortgage over the other and some financial planners feel very passionate about the reasons why they support one over the other. It is quite obvious for instance that you will pay less interest on a 15 year mortgage term than on a 30 year mortgage, but this is not the only factor that must be considered.
Take a look at a few situations when a 30 year mortgage might look like the more attractive option, and may just turn out to be the smarter choice.
When You Have Other Short-Term Goals
A 30 year mortgage might stretch out your payments for an additional 15 years but the flip side of this is that the monthly payments are smaller and more manageable. Therefore, if you have other short and medium term goals that you want to achieve you may not be able to afford to balance them with the hefty debt load of a 15 year mortgage. In this case it is smart to take on a 30 year mortgage so you can have a more balanced financial plan and not sink all your money into making house payments.
When You Don’t Want Uncertainty
A 30 year mortgage is set on fixed rates. While this rate is usually higher than the rate on a 15 year mortgage it is fixed so there are no surprises at the end of the month. Some people find mortgage rates that hold steady for the first few years and then become adjustable hard to manage, because it means that you must cater to increasing monthly payments.
When You Plan to Move to a Single Income
A 30 year fixed rate mortgage is better for couples who plan to move from both parties earning an income to living on a single income only. Some families start off on two incomes and then one person leaves the work force to stay home with children and the smaller payments on a 30 year mortgage mean that they still affordable even on one salary.
When Interest Rate Spreads are Minimal
The interest rate spread is simply the difference between the rate quoted on a 30 year mortgage and the rate on a 15 year mortgage. Generally speaking, the closer the rates on the two different terms are the less benefit a 15 year mortgage offers because it diminishes the interest savings. If there is less than 1% difference between the two there is a relatively small amount of money to be saved by choosing a 15 over a 30 year mortgage which makes the flexibility of the 30 year more attractive.
When You Have the Discipline to Invest
Another one of the benefits of taking a 30 year mortgage is the freedom to invest the difference that would have gone towards a higher 15 year installment. Some argue that those who have the discipline and sophistication to invest in vehicles that can yield a good return stand to benefit financially from choosing this option.
Instead of turning blue in the face arguing for one mortgage term or another it is much better to accept that the choice is a personal one and must fit the circumstances of the people involved. Sometimes this means the 15 year term will emerge victorious, while in some circumstances, like the ones listed above the 30 year mortgage will reign supreme.
Related posts:
- 30 Year Fixed Rate Home Loan
- 15 Year Fixed Rate Home Loan
- Home Loan – 20 to 30 Year Fixed Rate
- St.George Three Year Fixed Plan
- NAB Fixed Rate Home Loan (1 Year)
- 10 year fixed rate home loan
- AMP Bank Introductory 1 Year Fixed Rate Loan
- St.George Intro 1 Year Fixed Rate
- ANZ Three Year Fixed Rate Home Loan
- ANZ Fixed Rate Home Loan (1 Year)
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