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Doubling Down on a Lifetime Investment?

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If you currently have a conventional 30 Yr. mortgage, it is easy to understand why. It is without a doubt the most popular and widely utilized home loan product - it’s the apple pie of the mortgage world. It’s safe, easy to calculate, and leaves you with little to think about from month-to-month.

But if the 30 year mortgage is the Man of the House, the 15 year loan is the unpopular little brother. He’s the one a lot of people don’t like to talk about, due to the glaring elephant in the room - he’s EXPENSIVE. With him, you definitely will be paying more on a monthly basis, and right away.

But if you have the financial means to handle a larger monthly payment, you may find that Little Bro could save you a LOT of money in the long run. How does that work, exactly?

We’re glad you asked.

First let’s talk rate. Generally, shorter term loans bring lower interest rates. Your lender WANTS a lower term - they’re taking on less risk over fifteen years than over thirty. It’s that decreased risk that often causes them to offer substantially reduced rates, to entice you to choose a product more to their liking.

Now let’s take a look at that elephant - the big, scary monthly payment. Sure, your wallet will feel thinner each month, with the payments on average up to 45-50% higher than it would be spread over 30 years, depending on your unique purchase and financial situation. But you’ll save so much more in the long term, via both the lower interest rate and also because you’ll pay more towards the principal each month.

Did you know that in total, you might pay almost double with a 30-year mortgage over what you would pay on the same mortgage that’s a 15-year term? That’s because you’re paying an extra 15 years of interest.

Plus, there are fringe benefits! With a 15 year, you’ll build equity in your home twice as fast. Combine that shorter mortgage term with today’s rising home prices, and you could exponentially grow the amount of equity you have - which is especially nice if you’re looking to refinance down the road.

Now, think about your age - what are your retirement plans? If you’re looking to retire within the next 15-20 years, you could drastically reduce the amount of pressure on your monthly budget come retirement. That means more money to travel, make improvements on your home, or finally buy that boat you’ve been dreaming about!

We suggest talking to a Midwest Lending mortgage professional before deciding which loan is best for you. Weigh the closing costs and/or fees between the options. And take a good look at where you’re at financially and in life. Are you in fact nearing retirement, or could you get a better rate of return investing the additional money you would have each month? We’ll help you adequately evaluate your financial situation and discuss your concerns, in order to help you make the best decision for you and your family.