The pros and cons of 15-year mortgage Essay

The 15-year mortgages rate are typically offered at an interest rate of .50% to .75% lower than the 30-year fixed. Along with the fact that the loan is paid off much faster a 15-year mortgage you will save the borrower thousands of dollars annually in interest payments.
Highlights
Buy a house with a prompt payment as low as 5% (main house).
Refinance up to 95% of the value of their primary residence.
a 15-year mortgage will allow the owner to create equity much faster than who chooses one to 30 years.
when selecting a 15-year mortgage, the borrower ensures that your payment will never be adjusted dramatically and will always have an affordable payment.
How does it work?
Monthly payments are based on the interest rate, the amount of the loan principal and interest amortized over 15 years.
Your payment will not change throughout the life of the loan.
Your current payment will be based on your situation and current interest rates when you apply.
Pay off your mortgage at any time without pre-payment penalties.
Requirements
Amount of loan - The loan amount of a mortgage in accordance with the guidelines of Fannie Mae and Freddie Mac is generally limited to $ 417,000 for a single-family housing, although limits may be higher in countries where homes are more expensive. Jumbo loans allow you to exceed the maximum conforming mortgages and borrow for a house higher price.
Prompt payment - Most conventional loans require at least a 5% down payment. Requirements for loans with lower payments early, explore mortgages backed by the government as FHA loans.
Credit history - Conventional loans generally require a FICO credit score of 640 points or more. There are other guidelines established in relation to income and other financial information.
Example of a mortgage of $100,000 to 15 years
Unfortunately, historical data have only 15 years, but at a comparative level are sufficient. We simulated the evolution of a variable mortgage fees and other fixed both theoretically formed in January 1999 and monthly renewal (obviously only the variable mortgage), and represent them in the following chart.
SCENARIO Payment of a $ 200,000 loan at a fixed rate of 15-year 3.125% and 90% loan-to-value ratio (ratio of the loan amount to property value) is $ 1393.22 *, no points at the time of closing.
Of course, the starting point today is the minimum, which means that the comparison does not reflect a real situation today, so we also simulated a mortgage variable rate, assuming that their evolution would reverse the historic, starting at the current minimum levels and ending in 1999.
15 year mortgage rates are attractive because of their lower initial rate. The risk is that the rate and the monthly payment will increase in the future. If you. It is comfortable to accept an increase in the payment or if you think it is moving in a relatively short time, an ARM savings can be substantial.