Thursday, July 12, 2012

Why a 30 year Mortgage is the Better Choice

 There has been great debate in a 30 and 15 year mortgage. Based on my opinion a 30 year mortgage is a no brainier. 

Yes, the 15 year loan allows you to pay off your home in half the time while saving a significant chunk of money on interest. Although this is a huge benefit, a 30 year loan suits most homeowners today. The flexibility of a 30 year loan is the main advantage. 

The payments of a 30 year loan are lower allowing you to save or invest the difference. Who knows if you will get laid off or if you will have an emergency. The lower payments will allow you to put money away for a rainy day fund. 

Holders of 30-year loans can always make the extra payments required to pay them off in 15 years, should they choose to do so. Nonetheless, you are never obligated and can always change your mind. With the 15-year loan, you are desperately committed to giving that extra money to your lender whether you can afford to or not. 

Lastly, inflation lowers the value of the dollar over time. For example, payments made during the last 15 years of a 30-year loan are much lower in real terms than the day you first get the loan. Every way you look at it, the faster inflation rises, the less sense it makes to pay off the mortgage early. With that said, a 30-year loan is absolutely a best decision to make. 

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