QRB week 4

(DECIDING BEST MORTGAGE TERM MIND MAP)

15-Year Mortgage is payments is nearly 50% higher than traditional 30-Year Mortgage. Not everyone can afford.

Affordability

Deciding a 30- vs. 15-Year Mortgage

Age and Job Situation

15-Year needs you to hard look on future job security. If you lose your job, you may not have enough income to qualify 30-Year.

30-Year will allow the home owners extra money invest into 401(k) while still employed and tax deduction after retire.

Overall Finances

A 15-Year will let you save money, but at the same time, you would not have extra money to invest for other financial goals.

30-Year will allow you to take care of other higher personal-finance priorities, such as an emergency fund or 401(k).

ANALYSIS OF BEST MORTGAGE TERM OPTION

There were no better times than today’s record low mortgage interest rates for homebuyers and refinancers. Homebuyers and refinancers are enjoying two great interest low mortgage term options, which are 30-year or 15-year mortgage, to choose for maximizing their financial gains. The right answer for which term is better is depending on each one’s financial situations and future goals. As the current interest rates for both terms are historically low, many of smart homebuyers and refinancers are in a happy dilemma to decide is which type of loan is better for them. By considering both the pros and cons of each term as illustrated on the attached mind map, there is no single clear answer that covers every homebuyer’s unique financial situation. On the mind map for deciding the best mortgage term, the three main subjects (Affordability, Age and Job situation, and Overall Finances) were discussed with advantages and disadvantages of each term. It is all come down to individual choices for selecting the best option depending on each homebuyers and refinancers’ individual financial goals and situations. If they are still not sure which way to go, there is another possible option to consider. My suggestion is to get the 30-year fixed mortgage loan and pay extra money to their monthly mortgage payment as an additional principal. This additional fund can be made whenever and whatever amount they can manage. Since the most mortgage companies do not incur prepayment penalties, paying extra cash whenever they can afford will shorten the loan term just like a 15-year mortgage term without obligating to a 15-year hefty payments.

References

Mortgage Comparison: 15 years vs 30 years (2018). Retrieved from