Fort Lauderdale FHA Loan Mortgage Rates: 15 vs. 30 year

An FHA loan is an FHA-insured mortgage. They’re especially popular among first-time buyers because they permit 3.5% down payments for 580+ credit scores. However, you must pay insurance premiums on these loans, which protects the lender in case of default.

You can choose between a 15-year or 30-year fixed-rate mortgage. Our FHA home loans Fort Lauderdale are similar in terms of structure, with the major distinction being the term of years. A shorter-term loan requires higher monthly payments, making the 15-year loan appear less affordable.

However, in reality, the shorter term makes it more affordable on numerous fronts. In fact, over a loan’s full life, a 30-year loan will end up costing more than double the 15-year option. Here’s what you should know about the two loan terms.

How a Mortgage Term Influences the Cost

In a term loan, you pay interest gauged on a yearly basis against the loan’s outstanding balance. Both the monthly payment and interest rate are fixed.

Since borrowers pay fixed monthly payments, the segment going to pay interest and the one paying principal change over time. Initially, since the loan balance is very high, interest forms most of the payment.

However, as the balance decreases, the payment’s interest share declines and the portion going to principal increases. In 30-year FHA Loans Fort Lauderdale, the balance decreases more slowly compared to a 15-year loan. The higher the interest rates, the bigger the gap between the two loans.

Additionally, 15-year loans are less risky for financial institutions compared to 30-year loans. After all, it costs institutions less to develop shorter-term loans than longer-term ones, so our 30-year FHA home loan in Fort Lauderdale, FL usually comes with higher interest rates.

FHA home loans Fort Lauderdale

30-year FHA Loan

Numerous buyers choose this term because it’s associated with the lowest monthly payment. That’s because you’ll repay the loan over a long period if you retain the loan until the endpoint. If your biggest concern is monthly cash flow or you earn commissions and your revenue varies, this might be your best option.

A 30-year loan is a good way of securing a nice property with affordable monthly payments. Some of the features of this loan include:

Low down payments

Without the capacity to borrow cash from lenders in the form of mortgages, most wouldn’t be in a position to buy homes. There are various reasons why potential homebuyers use FHA-insured loans compared to other products.

To begin with, purchasers have less restrictive income and credit requirements compared to conventional mortgages and the down payments can be as low as 3.5% of the sale cost. Additionally, the rules allow cash payments to purchasers to help cover the closing costs and down payments. Sellers can also contribute a segment of the sale proceeds to closing expenses.

Popularity

Most buyers use 30-year mortgages to fund their homes, whether through the Veterans Administration, FHA, or other lenders. Most credit unions, banks, and savings and loan companies offer these kinds of loans since they’re the simplest forms in the business, comprised of an interest rate and unchanging terms of payment over the loan’s life.

15-year FHA Loan

This loan is ideal for those who can afford higher monthly payments and wish to pay off their mortgage in half the typical time while saving thousands or more in interest. To make this loan work, you’ll need an income that is dependable and sufficient to cover savings, emergencies, and other expenses.

Advantages

Build Equity Quicker

A 15-year mortgage features higher payments and lowers interest rates, making it easy to build equity quicker since you pay the principal balance faster.

Shorter duration to homeownership

Owing a home is a goal for numerous people. Moreover, knowing that the home is paid off fully gives a sense of safety.

Save Money

A 15-year mortgage is cheaper since you pay the interest over half as many years compared to a 30-year mortgage.

Disadvantages

Higher Payments

Monthly payments for this mortgage run approximately 50% higher compared to a 30-year loan. Moreover, you must pay insurance, taxes, and mortgage insurance if you put less than 20% down. This could make it difficult for you to respond to emergencies among other needs.

Opportunity Cost

Using cash to make mortgage payments implies it’s unavailable for other investments-a higher stock investment return for instance.

Choosing between a 15 and 30-year mortgage is a matter of being well informed and considering various factors. Fortunately, this guide offers invaluable insight if you’re uncertain about which option to choose.

 

By |2018-11-15T14:06:42+00:00November 15th, 2018|blogs|0 Comments

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