As far as finishing your mortgage as quickly as possible and paying as little interest as you can, a 15-year loan is the best.
Its short-term nature allows you to trim your balance faster and build plenty of equity on your property in no time. This is ideal for would-be retirees too; it could relieve pressure off your monthly budget and get your loan paid off before you stop working.
However, a 15-year home loan in Portland, Miami, San Diego, or any other major market, would come with a price. Although they’re not necessarily disadvantageous, but these are the things you might have to give up to get it:
Low Monthly Payment
The short mortgage term would cause you to shoulder your entire balance in fewer months. Even if you get a low-interest rate, you might be paying over 50% more than your monthly repayments with a 30-year loan.
Large payments bring less flexibility, considering your financial situation may take a turn for the worse in the future. If you lose your job or get a medical problem down the road, your big mortgage repayments may prove to be too heavy to shoulder.
Extravagant House
As your monthly payments would be huge, you might not qualify for a big loan amount.
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In turn, you may be limited to modest properties, which may not be perfect for growing families.
Even if you have the pristine credit and a stable job, lenders would also your consider debt-to-income ratio. If you have little room in your budget to accommodate an enormous mortgage expense, a 15-year loan may not buy a huge property.
Other Investment Opportunities
Many individuals would rather put their cash on other places than to their mortgage. A 30-year loan may take a while to mature, but its low monthly repayments loosen up the budget.
On the other hand, you may not feel as liquid with a 15-year mortgage. You might have small dispensable money to build up other savings, like in a 401(k) retirement account.
Just like with other types of mortgages, you get some and lose some with a 15-year loan. If you have a large income to afford its potentially large monthly repayments, go ahead. If you don’t, explore your more options first.