When it comes to 30 year fixed rate mortgages, there’s good news and bad news. First, the good news: With a 30 year home loan, a payment will likely be lower than with a shorter loan, and the home buyer might be able to afford a pricier house than otherwise.
The bad news? The homeowner will pay more over the long term, and it’s a very long term, indeed. Which means they will be waiting a lot longer to truly own the home.
But there’s even more good news: A homeowner can easily convert that 30 year fixed rate mortgage to a 15 year fixed rate mortgage. Over the life of the loan, there are many opportunities to switch to a 15 year term, and there are many compelling reasons to do exactly that.
“Rates won’t stay this low forever. The best opportunity for homeowners to take advantage of the lowest rates is to refinance from a 30 year fixed rate mortgage to a 15 year fixed rate mortgage.” States Adam Hamilton VP Lending Manager of RANLife, Inc. He further states, “The payment difference between the two terms isn't as extreme as most people would think.”
Why consider converting to a 15 year fixed rate mortgage?
The most obvious benefit of converting a mortgage from a 30 year fixed rate mortgage to a 15 year fixed rate mortgage term is that the home will belong to the home buyer much sooner. Less obvious but even more important is the fact that they will save huge sums of money, beginning almost immediately.
A faster, less costly path to mortgage freedom
The 15 year fixed rate mortgage loans typically have lower interest rates. The homeowner will save a tidy sum in interest over the life of the loan, and more of the money from each payment they make will go toward the balance of the principal. Because the loan’s principal drops faster, there’s also less interest to pay. For more information about interest savings scenarios visit RANLife, Inc.
If a homeowner can easily afford a home with a 15 year loan, converting from a 30 year is a great investment. And with interest rates so low, it may be less costly than people think. Rates won't stay this low forever. By eliminating 15 years from the mortgage term, a homeowner could keep tens or hundreds of thousands of dollars in their pocket.