Yahoo Finance Rachel Cruze: Why You Should Only Get a 15-Year, Fixed-Rate Mortgage
Buying a home, especially if it’s your first home, can be an exhilarating, intense and, at times, confusing process. You’re practically bombarded with questions to answer and decisions to make to ensure that everything falls correctly into place and doesn’t hurt your financial health.
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One of the biggest decisions to make when buying a home is what type of mortgage to take on. The most popular mortgage people get is a 30-year fixed-rate mortgage. This choice spreads out repayment over 30 years, and your interest rate won’t change over that time, so long as you don’t refinance your mortgage. But 30-year fixed-rate mortgages aren’t the only option, and financial expert Rachel Cruze isn’t a fan of them.
15-Year Fixed-Rate Mortgages Follow the Same Principle as 30-Year Fixed-Rate Mortgages
Cruze advocates for 15-year fixed-rate mortgages. It’s the same principle: You repay a fixed amount over up to 15 years. Americans may be more averse to this choice because it means dishing out more cash a month, albeit for a shorter period of time, allowing you to pay off your mortgage faster.
A 15-year fixed-rate mortgage is Cruze’s preferred choice because it saves you money on interest over the years.
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You’ll Save Money in the Long Run
“Your monthly payment will be higher with a 15-year term, but you’ll pay off your mortgage in half the time of a 30-year term,” Cruze wrote on Ramsey Solutions. “Saving tens of thousands in interest.”
So, while a 15-year fixed-rate mortgage may appear to be pricier because you’re required to pay double every month what you would on a 30-year fixed-rate mortgage, you’re paying your home off twice as fast and, as Cruze highlighted, ultimately saving a boatload of money on interest.
Interest Rates Are Sky High Right Now
This is particularly important to think about right now when the average interest rate for 30-year fixed-rate mortgages is 7.21%.
Another perk of 15-year fixed-rate mortgages? They typically come with lower interest rates. For example, right now, the 15-year fixed interest rate is 6.63%.
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This article originally appeared on GOBankingRates.com: Rachel Cruze: Why You Should Only Get a 15-Year, Fixed-Rate Mortgage
