I've been told that the best type of program is to get a fixed rate loan.  I’ve also heard that I should get a fifteen year loan if there is any way I can manage the additional monthly expense. 

             You should get together with a mortgage consultant who can explain the different types of loan programs.  Each program may have its own series of special benefits for you and your specific situation.  I have found that when considering such an important decision it is best to feel as if you have explored all possibilities.  It may be that a fixed rate is the best type of loan program.  It may also be that you can save  significant amounts of money by exploring alternatives adjustable programs, balloon programs, and others.  In this day and time there are almost as many different programs as there are housing options.  A few things you should consider are the anticipated time in the homes, available asset base, current income situation vs. future income situation, etc.  It’s wise to choose the most appropriate program based upon what is actually occurring in your life at this time.

 

If you pay off a loan in fifteen years versus thirty years you will obviously save a lot of money in interest expense.  It is important to note that this savings is due to the repaying the loan in half the time.  It is not due to a significant savings in interest rates.  You would expect that there would be a much lower rates since the loan has a quicker repayment and therefore, is a loan with less risk.  In actuality, the difference in interest rates is not that significant.  Rates on fifteen year loans may be 1/4% to 3/8% better than thirty year rates.  Payments on fifteen year loans will be approximately 25% higher on a monthly bases.

 

Many people sign a fifteen year mortgage only to discover that the monthly payments are just a little too high for their budget.  If you wish to pay your loan off earlier, without the obligation of a 15 year mortgage, ask your loan officer to provide you with an amortization schedule which will show what your payments would need to be in order to pay off your 30 year loan in 15 years.