Four Reasons A 15-Year Mortgage May Be A Bad Idea


On the surface, a 15-year mortgage makes a lot of sense. You will pay off your house in half the time as a traditional 30-year mortgage and do so by paying less interest on the loan. However, there are several reasons that a 15-year mortgage may be a bad idea for you. The following are four of these reasons to think about.

You may not be able to save enough for retirement

If you choose a 15-year mortgage, naturally, you will have higher payments each month, but you must be careful that you can afford this and still save for your retirement. If a 15-year mortgage means you will have little left over for your retirement savings, then you want to finance your home for a longer period of time. You don't want to put all of your retirement money into your home only to need the equity at the time you retire.

Your retirement horizon is far away

If you are 25 years or more away from retirement, you will have plenty of time to pay off your mortgage before you retire, or if you don't pay it off, you will have only a few payments left on the day you retire. The extra money you have each month with a 30-year mortgage can be used to live a higher quality of life. Unless you plan on retiring in 15 years or less, there is no rush to pay off a mortgage.

Higher monthly payments can lead to delinquency

If this is your first home buying experience, you may struggle to make your mortgage payments if they are too high. The lower monthly payments that you will have with a 30-year mortgage will give you more breathing room in your monthly budget, and this gives you a better chance of not falling behind or defaulting on a mortgage due to unforeseen circumstances.

You don't have the option of paying down your mortgage

If you have a 15-year mortgage, you are locked into a certain payment that will be higher than a 30-year mortgage of the same interest rate. But with a 30-year mortgage, you still have the option of paying more if you choose to. In fact, there are investment experts who claim that making a double payment early in a 30-year mortgage is a good, long-term investment. The point to remember is that you are less likely to be able to do this with a 15-year mortgage. The payments will simply be too high.

Keep the above ideas in mind when contemplating a 15-year mortgage; they are not for everyone. The mortgage that is best for you will be the one that fits your personal finances the best. Be sure to find a trusted loan institution, such as Doolin Security Savings Bank, to land on the best decision for your personal needs. 


26 October 2015

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