Today’s Best Mortgage Deal: Shorter Terms Hold the Biggest Savings

Getting a mortgage can be a daunting task, especially if it’s your first time. With so many lenders and mortgage types available, it may be overwhelming to choose the right one. But don’t fret! We’ve done the research for you. In this article, we will discuss today’s best mortgage deal and why shorter terms hold the biggest savings.

The Current Mortgage Market

The current mortgage market is experiencing some of the lowest interest rates in history. The Federal Reserve has kept interest rates low to help stimulate the economy in response to the COVID-19 pandemic. Because of this, mortgage rates have continued to decline, making homeownership more affordable for many Americans.

According to Bankrate, the average 30-year fixed-rate mortgage is currently at 3.04%, while the average 15-year fixed-rate mortgage is at 2.47%. While both of these rates are historically low, there is a significant difference in the amount of interest paid over the life of the loan.

Shorter Terms Mean More Savings

When it comes to mortgages, shorter terms typically mean more savings. This is because shorter-term loans have lower interest rates, which means you will pay less in interest over the life of the loan. For example, let’s compare a 30-year mortgage with a 15-year mortgage.

If you take out a $300,000 30-year mortgage at a 3.04% interest rate, you will end up paying $167,984 in interest over the life of the loan. However, if you take out a $300,000 15-year mortgage at a 2.47% interest rate, you will only pay $63,092 in interest over the life of the loan. That’s a savings of over $100,000!

Of course, the monthly payments on a 15-year mortgage will be higher than a 30-year mortgage because you are paying off the loan in half the time. But if you can afford the higher monthly payment, a 15-year mortgage can save you a significant amount of money in the long run.

Other Benefits of Shorter-Term Mortgages

In addition to saving money on interest, shorter-term mortgages offer other benefits as well. For one, you will build equity in your home much faster with a shorter-term loan. Because you are paying off the loan faster, you will own more of your home sooner.

Another benefit is that you will have a lower interest rate, which means you will have a lower monthly payment if you refinance in the future. Refinancing to a lower rate can save you even more money on interest, and with a shorter-term mortgage, you will be in a better position to take advantage of lower rates.

Who Should Consider a Shorter-Term Mortgage?

While a shorter-term mortgage can save you money in the long run, it’s not the right choice for everyone. If your monthly budget is tight, a 15-year mortgage may not be feasible. You may also need to consider additional expenses, such as maintenance and repairs, insurance, and property taxes.

However, if you have a stable income and can afford the higher monthly payment, a shorter-term mortgage can be a smart choice. If you are nearing retirement, a 15-year mortgage can help ensure you have your home paid off by the time you retire. And if you are looking to build wealth through homeownership, a shorter-term mortgage can help you save money on interest and build equity in your home.

Conclusion

Today’s best mortgage deal is a shorter-term mortgage. With interest rates at historic lows, borrowers can save significant amounts of money by choosing a 15-year mortgage over a 30-year mortgage. While a shorter-term mortgage may not be feasible for everyone, those with a stable income and a desire to build wealth through homeownership should consider this option.

Remember, when it comes to mortgages, it’s essential to do your research and compare rates from multiple lenders. By doing so, you can ensure that you are getting the best deal possible and are on your way to building equity in your dream home.