Either way, it’s not a bad return compared to bank savings and Treasury bonds. But banks and bonds might pay more in the future, and if you took the 15-year loan you’d be committed to putting extra money into the mortgage instead of other investments.
The second consideration: Should you split the difference and take out the 30-year loan, planning to retire it early by making extra principal payments? You would pay the higher interest rate but could still save substantial sums by paying interest for fewer years. With this approach, you would not be committed to the bigger monthly payments, which would be nice if money got tight or you found a bigger return with another investment.
To weigh these alternatives, use the BankingMyWay Mortgage Loan Calculator.
After running the numbers, many people decide that the big payment on the 15-year mortgage is too much of a strain. But some borrowers will find that today’s unusually low rates tip the balance, making the 15-year deal the best option.
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