10 Tips On Affording A 15-Year Mortgage

Deciding what length of mortgage to choose when you’re buying a home is an impactful financial decision. While 30-year mortgages often make the most sense (about 90% of home buyers choose that option), some home buyers opt for a shorter 15-year mortgage in order to pay the debt off more quickly.

If this is an option you've been considering, you may be wondering how to be sure you can afford those higher monthly payments? Here are a few tips to help you determine if a 15-year mortgage best fits your budget - and to help you stay on track financially as you pay it down.

Make Sure You Understand The Costs Of A 15-Year Vs. 30-Year Loan

If you are thinking about buying a home, it is important to understand the differences between a 15-year mortgage and a 30-year mortgage. A 15-year loan will have higher monthly payments but you will pay it off faster. A 30-year loan will have lower monthly payments but take longer to pay off. Think carefully before making your decision.

Build Up Your Emergency Fund

Building up an emergency fund is critical when it comes to affording a 15-year mortgage. It helps you stay on track financially and provides peace of mind knowing that if life throws you a curveball, you have the funds available to help make ends meet.

One of the best ways to start an emergency fund is by saving a portion of your income each month. Put away at least 10-20% of your net income into a savings account and make sure it is easily accessible when you need it.

Choose A Reasonably Priced Home

Finding a reasonably priced home is one of the most important steps in the home buying process. A great way to start your search is by understanding the current real estate market and determining what type of budget you have. It’s important to set realistic expectations for what you can afford, as it will help make sure your purchase experience goes as smoothly as possible.

Increase Your Cash Flow

Increasing your cash flow is one of the most important things you can do when it comes to affording a 15-year mortgage. Your cash flow is the amount of money that enters and exits your bank account each month, and it will determine how much you are able to pay towards your loan.

One effective way to increase your cash flow is by budgeting and cutting unnecessary expenses. Start by tracking all of your income and expenditure, and then make a list of which expenses you could reduce or cut out entirely. This could include entertainment subscriptions, eating out, shopping for luxury items, or even reducing your electricity bill.

Lower Your Debt-To-Income Ratio

One of the most important steps when it comes to affording a 15-year mortgage is to lower your debt-to-income ratio. This ratio compares the amount of money you owe in debt to the amount you earn each month. It measures how much of your total income is being used to service your debts, such as credit cards and other loans.

You can lower your debt-to-income ratio by working to pay down existing debts, or by increasing your income. Paying off smaller debts first and then tackling the larger ones is a great strategy. You could also consider taking on another job or finding ways to increase your current salary in order to boost your monthly income.

These tips can help you determine if a 15-year mortgage best fits your budget - and how to stay on track financially as you pay it down. Buying a home is an important financial decision, so make sure you do the research needed to find the right choice for your unique situation. Good luck!

Consider Your Long Term Goals

When considering a 15-year mortgage, it is important to consider one's long term goals. A 15-year loan will have higher monthly payments but you will pay off the loan much faster than a 30-year loan. This can be beneficial if you are looking to become debt free sooner or build equity in your home more quickly. It is important to look at the long term picture and weigh the pros and cons of a 15-year loan.

Track Your Monthly Spending

Tracking your monthly spending is one of the most important steps when it comes to affording a 15-year mortgage. Knowing exactly where and how much money you are spending each month will help you create a budget that works for you – and stick to it.

A great way to start tracking your spending is by listing out all of your fixed expenses, such as rent or mortgage payments, car payments and insurance, utilities, etc. Then add in all of your variable expenses such as food, entertainment and transportation. Once you have a good idea of how much you spend each month, it will be easier to create a budget that works for you – and stick to it!

Improve Your Credit Score

Improving your credit score is an important step when it comes to affording a 15-year mortgage. A good credit score can give you access to more competitive interest rates which in turn leads to lower monthly payments and overall costs. It is important to understand the factors that are used to calculate your credit score, such as payment history and credit  utilization, and work to improve them.

You can start by checking your credit report for accuracy – mistakes are more common than you may think. Then make sure that all of your payments are made on time as this has a major impact on your score. You should also focus on paying down existing debts, especially any with high interest rates, in  order to free up more cash each month to put towards your loan.

Make A Larger Down Payment

Making a larger down payment when buying a home is one of the best ways to lower your overall mortgage costs and save money in the long run. By putting more money upfront, you can reduce the size of your loan and enjoy lower monthly payments. Additionally, if you make a down payment of 20% or more on a conventional loan, you may be able to avoid paying private mortgage insurance (PMI).

Pay Your Closing Costs Upfront

Paying your closing costs upfront when purchasing a home can be an excellent way to save money in the long run, as well as reducing your total loan amount. Closing costs can include fees such as title insurance, survey fees, loan origination fees and more. Generally, these costs add up to between 3-5% of the purchase price  of your home, so it is worth considering if you can afford to pay them upfront.

Conclusion

We've included these tips to help you determine if a 15-year mortgage best fits your budget - and how to stay on track financially as you pay it down. Buying a home is an important financial decision, so make sure you do the research needed to find the right choice for your unique situation. Good luck!