March 1, 2008

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The monthly payments for 30 year or 15 year fixed mortgages are the main considerations for many people who are looking to buy a home. Early completion of a mortgage is important for those of use that leave buying a home until later in life. But, before you commit yourself and sign any documents, there are points you should consider.

It is important to remember that you want to make sure that the interest rate doesn’t change over the course of the loan. If you are offered a deal that appears to be too good to be true than it probably is. A fixed rate mortgage maintains a set interest rate during the life of the loan. This is beneficial for any of us who don’t like surprises. We had already decided to research long term fixed mortgage rates when we started looking at homes for sale.

We wanted to pay off the house as soon as possible but we didn’t want to get in over our heads with high monthly payments. It became obvious that we had to look at fixed rate mortgages over a longer period and not just 15 year fixed rate plans.

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No-one likes the idea of having a mortgage when they are close to retirement, and we were no different, so it was still our hope that a 15 year fixed mortgage rate plan would still be an option. There was a lot of pressure to have the house paid off as soon as possible. We thought about it long and hard and Despite the pressure we decided to go with the 30 year loan plan.

There were many things that factored into this. First of all, I discovered that I was having a baby. I decided I wanted to raise my child at home so I couldn’t be certain of my monthly financial contribution to our household expenses. Loans that had 15 year fixed mortgage rates required a higher monthly payment. All things considered, we just didn’t want to bite off more than we could chew. The 30 year loan repayments were considerably lower than the 15 year figures.

Being able to make additional lump sum payments during the year means the outstanding loan reduces faster. My making just a few of these payments each year we discovered that year’s could be taken off the mortgage term. Although this isn’t easy to achieve, in the long term it is well worth it. It was hard going against our preference for a shorter term fixed rate mortgage but we had to think about more immediate needs and abilities.

All things considered, it all worked out for the best.

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