Alliance Credit Union
800.232.8669 Routing Number : 321176804
800.232.8669   Routing Number : 321176804

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Fixed Rate Mortgages - Considering a 15-year Mortgage

A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower and more importantly - you'll pay less than half the total interest cost of the traditional 30-year mortgage.

However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. A 30-year mortgage still makes sense for most people.

Who Should Consider a 15-Year Mortgage?

The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.

Advantages and Disadvantages of a 15-Year Mortgage

The 15-year fixed rate mortgage offers two big advantages for most borrowers:
  • You own your home in half the time it would take with a traditional 30-year mortgage.
  • You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.
The possible disadvantages associated with a 15-year fixed rate mortgage are:
  • The monthly payments for this type of loan are roughly 10 percent to 15 percent higher per month than the payment for a 30-year.
  • Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.
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