July 17th, 2011 9:26 PM by Taydus Taydus, AHWD, CNE, CRS, GRI
On the surface the 15 year mortgage is a very attractive
option because the rate is typically ½ percentage point lower and you pay off
the loan in ½ the time.
Upon closer examination, unless you have limitless cash available,
the 15 year can be a very dangerous option with little benefit to you.
The key to the 15 year loan is all about making a payment
that is 30% higher each month. If your
30 year payment is $1,500 then your 15 year payment would be $2,000 which is
obviously significantly more.
You can make the same additional payment on your 30 year
loan and accomplish the same end result and that is that you will pay your
mortgage off in 15 years and 5 months.
That is correct. The ½ percent
lower rate translates to only 5 additional payments 15 years from now. Those additional payments are interest so
they are tax deductible and what will be the cost of money 15 years from now?
The danger of the 15 year loan is the fact that the payment
is 30% higher for 15 years. What if
something happens to you or you lose your job?
That extra payment each month could make the difference between keeping
your house and being forced to sell the home.
My conclusion and my experience over the last 20 years is
that the 15 year mortgage is not the best way to go for most people.
If you currently have a mortgage and are planning for
retirement, I will be happy to calculate the additional payment that you will
have to make to pay off your mortgage in a specific amount of time, or I can
tell you how long it will take to pay off your mortgage if you pay a certain
amount extra each month.
The best way to do this is to tell me your current balance,
interest rate, when you closed on the loan and your escrow for taxes and
insurance. With this information I can
give you a very accurate estimate.
For more information, please contact my preferred lender,
Joe Taydus – Bank of Commerce Mortgage at: (303) 544-0600 or email him at firstname.lastname@example.org