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Benefits of a 15-Year Mortgage in the Future

Posted on December 29, 2024February 19, 2025 by Foundation for the Future

Buying property is a goal for most adults because it allows you to turn a house into a home and call it your own. It is one of the biggest investments you will ever make, and over time, you will pay it off, having a tangible asset to take care of you in the future.

Whether you buy a house or rent, you still have to pay someone’s mortgage, so it may as well be your own. Your bank will lend you the money, and then it’s up to you to make monthly payments, but how fast you want to be mortgage-free is really up to you.

While there are 30-year mortgages available to you, some people want to pay theirs off faster. How about doing it in half the time? Is it worth it?

These are the benefits of a 15-year mortgage.

Mortgage Rates Are Lower

Giving out mortgages is one of the ways a bank makes money, as they charge an interest rate for the term of the loan. With a 30-year mortgage, a bank takes more risk and a higher interest rate is reflected in that. For a 15-year term, the bank gets its money faster and usually has a lower interest rate, sometimes up to a full percent. This means more of your payment goes towards principal rather than interest.

You Pay Less Interest

A lower interest rate translates to less money paid to the mortgages Windsor, but other interest savings exist.

The life of the mortgage is only 15 years rather than a standard 30 years, which means you only pay interest for half the time. The bank collects its share monthly, so the less time it takes to pay off the mortgage, the more money you keep in your wallet. Combined with a lower interest rate, you can have almost 2/3s of the interest compared to a 30-year mortgage.

Forced Savings

Regardless of the amortization period of a mortgage, you are required to pay it off. With a 15-year mortgage, the payments will be higher and require more of your hard-earned income.

No matter how much money you bring in, it all gets used up, whether for bills, living expenses, savings, investments or frivolous spending. A bigger monthly mortgage payment is a commitment you have made, and you must budget your life to afford it, but here is where the benefits are. This is a type of forced savings, and it helps you:

  • Increase your net worth
  • Pay yourself first
  • Focus your spending
  • Build financial discipline

You never want to put yourself in a difficult financial situation, but dedicating more money towards your home loan will mean less spending on non-essentials like eating out or buying clothes.

Building Equity Faster

As you pay down your home faster, this, in turn, increases your net worth in the form of equity. Having equity in a fixed asset like a house gives you leverage if you need money for other things, as it creates collateral when needed. There are always expenses that pop up in life or a need to raise money for:

  • Renovations on your home
  • Business start-up
  • College tuition
  • Investment property

These and other expenses can be funded by leveraging your home equity for a short-term loan. Because you aren’t taking money directly from your house, you keep the equity and make additional payments for the new loan.

Your Home Is Paid Off Faster

Maybe the best benefit of having a 15-year mortgage is that you will pay off your home fast. Fifteen years may seem like a long time, but it flies by, and before you know it, your spending will be much lower because housing is the priciest part of your living expenses.

Many people pay off their 30 mortgages close to retirement age, meaning less income they bring in. When you pay off your mortgage in half the time, your highest earning years are still happening, and you can then put this money towards other things like investments, travel or taking care of family.

Considerations

A 15-year mortgage means higher monthly payments, making things tight financially. Your bank or credit union is there to help you. It will determine how much you can qualify for using your gross annual income, down payment, assets and liabilities, and credit history.

Beyond affordability, you will qualify for a lower mortgage amount, making it a tighter home-buying budget, which can limit your market choices.

Talk to your lending institution about a 15-year mortgage to be mortgage-free faster. While you can take a more affordable route of 30 years, the overall benefits far outweigh any drawbacks you may experience. When you come out the other end of your mortgage, you will still be young and vibrant, ready to use that extra cash for anything you desire.

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