Which Is Better : 15-Year Fixed Rate Mortgage Or 30-Year Fixed Rate Mortgage?

As a home buyer or refinancing household in Renton , you have choices with respect to your mortgage.

You can choose a loan with accompanying discount points in exchange for lower mortgage rates; you can choose adjustable-rate loans over fixed rate ones; and, you can choose loans with principal + interest repayment schedules or repayments which are interest only, as examples.

For borrowers using fixed rate loans, there's also the choice between the 30-year and 15-year fixed rate mortgage. Each has its positives and negatives and neither is "better" than the other.

Choosing your most appropriate fixed-rate term is a matter of preference and, sometimes, of budget.

The 15-Year Mortgage
With a 15-year fixed rate mortgage, mortgage rates are often lower as compared to a comparable 30-year fixed rate mortgage. However, because loan repayment is compressed into half as many years, the monthly payment will necessarily be higher, all things equal. On the other side, though, homeowners using a 15-year fixed rate mortgage will build equity faster, and will pay less mortgage interest over time.

The 30-Year Mortgage
With a 30-year fixed rate mortgage, mortgage rates tend to be higher as compared to a 15-year fixed rate loan, but payments are much lower -- sometimes by as much as 50%. Lower payments come at a cost, however, as mortgage interest costs add up over 30 years. Regardless, 30-year fixed rate mortgages remain the most common mortgage product for their simplicity and low relative payment.

Which One Is Right For You?
There is no "best" choice between the 15-year fixed rate mortgage and the 30-year fixed rate mortgage. Choose a product based on your short- and long-term financial goals, and your personal feelings regarding debt. Mortgage applicants choosing the 30-year fixed rate mortgage can qualify to purchase homes at higher price points, but those using the 15-year fixed rate product will stop making payments a decade-and-a-half sooner.

There are benefits with both product types so, if you're unsure of which path works best for you, speak with your loan officer for guidance and advice.

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Lock An Instant 13% Savings On Your Monthly Mortgage Payment

Falling mortgage rates make owning a home more affordable. Mortgage rates are directly tied to monthly mortgage payment so as mortgage rates drop, so does the cost of home-ownership.  

It's a money-saving time to buy a home in Kent -- or to refinance one. Mortgage rates have never been this low in history.

According to Freddie Mac, last week, the average 30-year fixed rate mortgage fell to 3.87% nationwide for borrowers willing to pay an accompanying 0.8 discount points plus closing costs. 0.8 discount points is a one-time closing cost equal to 0.8 percent of your loan size, or $800 per $100,000 borrowed.

This represents an incredible value as compared to February of last year. 

It was exactly one year ago that mortgage rates begin their long slide lower. On February 11, 2011, the 30-year fixed rate mortgage reached its peak for the year, reading 5.05% in Freddie Mac's nationwide survey. If you are among the many U.S. households that bought or refinanced a home around that time, you could choose to replace your current home loan with a new one and save close to 13% on your monthly mortgage payment.

13 percent saved on your mortgage is a noteworthy statistic.

Look at this 30-year fixed rate mortgage payment comparison over the last 12 months :

• February 2011 : $539.88 principal + interest per $100,000 borrowed
• February 2012 : $469.95 principal + interest per $100,000 borrowed

Because of falling mortgage rates, a homeowner with a $250,000 30-year fixed rate mortgage would save at least $175 per month just by refinancing into a new loan at today's mortgage rates. That's $2,100 in savings per year. 

Even after accounting for discount points and closing costs, the "break-even point" on a mortgage like that can come relatively quickly.

We can't predict mortgage rates so there's no promise rates will stay like this forever. If you're planning to buy a home or refinance one, the best way to keep your monthly payments down is to lock your rate while rates are still low.

The market looks ripe for that now. 

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