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15 year mortgage rates

The housing downturn and subsequent recession have caused people to rethink their approach to home ownership in the coming years. Gone are the days of free-spending, variable rate mortgages that have made countless millions of Americans house-poor.

As a result, there has been a reflexive backlash against long-term committment and speculation. The end product has been a rise in the availability of the 15 year mortgage, which previously had only existed in fables like unicorns and the sasquatch.

Here’s How You Can Quickly and Easily Take Back Thousands of $$$$ In Property Tax

That said, the 15 year mortgage is actually somewhat attractive if you’re in an appropriate economic situation. The key is to understand your situation and what you should expect out of your mortgage, and how much you stand to save by opting with a 15 year mortgage instead of the more standard 30 year mortgage that was industry standard for decades.

The reason you can save money on a 15 year mortgage instead of a 30 year mortgage is that, generally speaking, the 15 year mortgage will have a lower interest rate and you’ll therefore be spending less money over the life of the mortgage to eventually own your house in full. It’s a simple concept, one that I intuitively jumped to myself.

However, I’ve just done a bit of research and come up with a few websites that consider the 15 year mortgage to be a sucker’s bet. One of them, themortgagereports.com, goes into excruciating mathematical detail as to why you’re better off avoiding the 15 year mortgage and going with the standard 30 year mortgage. Their reasoning is as follows:

Mortgage interest is tax-deductible. In plain English, deduct the amount of mortgage interest you paid in a year from your actual earned income and that is the amount against which you pay taxes. Again, talk to your accountant for particulars.

Later, they go into detail on specific numbers:

At Year 15, the total savings account balance is $160,280.38
At Year 15, the principal balance remaining on the 30-year fixed mortgage (from our amortization chart above) is $140,549.29

Spelled out: the savings account that we so diligently funded with the “extra savings and deductions” from choosing the 30-year mortgage will have earned enough interest to pay off the entire mortgage balance in full in fewer than 15 years! This is using the power of the mortgage interest tax deduction to its fullest.

The 30-year mortgage becomes a 14-ish year mortgage just by making a portion of your 15-year mortgage payment to your lender, and a portion to your savings account where it can accrue interest and compound.

So to me it seems like the key is to understand your tax benefits, save diligently and stick to the 30 year mortgage instead of the 15 year mortgage.

Tommy Thomas is the webmaster at ArticleVolcano.Visit our site for information on any subject under the sun.

Tags: 15 Year Mortgage, 15 Year Mortgage Rates, 30 Year Mortgage, Home Ownership, Mortgage Interest

This entry was posted on Saturday, October 3rd, 2009 at 12:19 pm and is filed under Education, Family, Finance, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.