Imagine owning your own home after only 15 years of mortgage payments! This is a real possibility if you opt for a 15 year term when you take out your mortgage. The monthly payments will be higher, so before you decide to take this route make sure that you can afford the higher payments. You may have the income to support this but you also have to make sure that your expenses allow for the payments and your household expenses, with money left over for groceries, clothing, leisure activities and emergency funds.
Once you have worked out a budget and know that you can afford higher monthly payments on your mortgage, there are many advantages to choosing a 15-year mortgage term. The most obvious advantage is that you will own your own home in record time. The majority of homeowners have terms of 30 or more years for a mortgage, which means that they are making payments to a lender for just about all of their working lives.
Paying off your home sooner provides you with the benefit of paying away less money in interest. The amount of interest added to your mortgage is calculated on the amount of the outstanding balance each month. By making higher payments over the course of a 15 year term you are not paying away a lot of your hard-earned money in interest or finance charges.
Looking ahead to 15 years down the road is hard to imagine, but looking ahead to 30 years is even harder. During the course of the 15 years, your income will likely go higher as you get raises and promotions in your career. When you have your home paid off at the end of the term, you will have much more money in your pocket each month to help your children pay for their post-secondary education or to build up a nice nest egg for your retirement. Maybe you are looking forward to purchasing a cottage or a boat for your leisure time.
At the end of the term when you have the mortgage repaid in full and you decide to sell the home, whether or not the real estate market is in good shape, you stand to make a good profit. Every penny of the sale, less the commission fees for the real estate and the legal fees, will be yours. At this time, you may decide to upgrade to a larger home and you have the downpayment you need for a mortgage.
While it is a good idea to consider taking out a 15 year mortgage because of the advantages, you should also take a good look at the future prospects of your job. Is there a chance that your company may downsize in the future or is there a possibility that your chosen career may suffer if there is a downturn in the economy? If so, you could be in a precarious financial position if your income is not sufficient to cover your monthly payments. Take a look at the interest rates on the mortgage. These also have an impact on the amount of your payment when it comes time to renew the mortgage. There are many things to consider when taking out a 15-year mortgage, but overall, if you can afford it, it is a wise decision to make.