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Question:


I recently heard that a 15-year mortgage is a much better buy than a 30-year mortgage. Why are they not as common?
-InTheMarket


Answer:


Part of it is tradition. Banks just got in the habit of making 30-year mortgages. In other places, such as Britain, 25-year mortgages are the norm. Those durations may have become popular because they roughly correspond to the time between when typical homebuyers would have saved enough for a down payment and when they are ready to retire and most likely would prefer to have paid off their home.
 
Finding a 15-year mortgage should be no problem, however, and it’s a good idea if you can afford the monthly payments. Even though interest costs aren’t a big worry these days, due to low interest rates, a greater portion of each monthly payment is applied to principal the shorter the mortgage term is, which allows equity to build up faster.
 
Rates recently have been about sixth-tenths of a percentage point lower on 15-year loans than 30-year loans, too, and let’s not forget the biggest benefit of all: You’ll own your home free and clear 15 years sooner.
-Conrad de Aenlle



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