Should I Choose a 15 year or 30 year Mortgage?

When you meet with a loan representative to secure financing after you've made a home purchase one of the questions you'll be asked is if you would like a 15 year term or a 30 year term. Time to make that decision.

At this point you need to consider your options. A 15 year term will likely give you a higher payment over a shorter time period, but a 30 year term will give you a lower payment with a longer time to pay it off.

Several things to consider are your job stability and your financial situation. Would you like to put more money into savings or a retirement or education account each month? The lower payment with a 30 year loan plus the tax deductions may make this a better choice.

If your job is stable and you don't see any changes in your future, this might be a good option and you will be paying less interest overall.

One other option if you want the lower payment but would still like to pay off your mortgage early, is to make biweekly payments rather than monthly payments. This alone will shave years off of your mortgage.

The bottom line, which is best for your budget and peace of mind?

Mortgage Payments

So it's time to pay your mortgage. Again. Would you like to be done with that obligation forever and always? Many of us would like to see that one go away. Did you know that you do have some options however.

If you refinance to a 15 year mortgage you will gain several advantages. The monthly cost will likely be higher than a 30 year mortgage payment but you will save thousands in interest over the life of the loan.  You will also shorten the payoff time.

You can refinance to a lower rate but keep payments the same. That way you will have the option to pay the smaller amount if your financial circumstance changes but if you pay a higher amount each month you not only work on lowering the principal balance but lower the interest cost over the life of the loan.

If you have financed more that 80% of the conventional loan you are most likely paying PMI or private mortgage insurance. After  you've reached a 78% loan to value, you will be able to drop the PMI and reduce your payments but 0.05%-1% of the loan amount annually.

Use those tax returns, bonus checks or inheritance payments to pay down the principal balance. Again, this will shorten the life of the loan as well as the long term interest paid.

You also always have the option of making extra payments or higher payments. Maybe a payment every two weeks is a good option for you. Make sure however that the  lender will apply this amount to the principal balance and not just toward the interest. You might be able to shave as many as 6 years off the life of your loan.

The bottom line however is choose the best option for you. If you have a steady income, a shorter refinanced term may be the best option. If your income is less consistent, the flexibility of extra payments when you can, may be a better option.