Most home buyers are aware of the availability of different financing options like a 15 vs 30-year mortgage. But because the details of mortgages can be quite complex, buyers may not be as familiar with specific differences.
For example, your credit score isn’t the only factor that can impact your mortgage rate. These rates can actually vary from state to state. As a Kansas home buyer, it’s important to know exactly what’s available to you.
Since buying a home is a very big decision, we want to share some helpful information about comparing Kansas mortgages:
Understanding a 15 vs 30 Year Mortgage
Throughout the course of everything we cover, the mortgages we’re referring to are fixed. If you want to understand more about variable mortgages, you can read our post that covers the pros and cons of variable interest rates.
As their names imply, the main difference between 15 and 30-year mortgages is their term. On a national basis, the 30-year mortgage is the most popular option for homeowners.
The simple explanation for this popularity is that the longer mortgage term means a lower monthly payment. However, it’s very important to look closer at the full financial impact before deciding.
How Mortgage Length Impacts Cost
Regardless of the specific mortgages you’re considering, it’s important to remember that they are all loans. The loan you receive is secured by your property, and it will be charged interest on an annual basis.
When you make a mortgage payment each month, part of it goes towards the loan’s principal and the rest towards interest. At the beginning of a mortgage, the bulk of each payment goes directly to interest.
Then as the mortgage progresses, more of each month’s payment is applied directly to the principal. This is what creates one of the most important considerations for deciding between a 15 year or 30-year mortgage.
Even though the 30-year option requires you to pay less each month, you’re paying more over the entire duration of the mortgage. In fact, the interest you pay over 30 years will be at least double that of a 15-year term.
Based on this information, it may seem like the shorter term is the best option. While it is for some buyers, there are still other factors to evaluate.
One is the higher monthly payments of a 15-year mortgage will tie up more money. This can take away from funds that would otherwise be put into investment accounts for retirement.
Another important factor is understanding that a 30-year mortgage doesn’t require you to wait that long to pay it off. You can reduce the length of this mortgage by making higher than required payments on a monthly or annual basis.
A Look at Interest Rates in Kansas
In addition to the factors covered above, home buyers need to look at the differences in interest rates before making their mortgage decision.
From a bank’s perspective, a mortgage with a shorter term carries less risk. That’s why the interest rate associated with 15-year mortgages is lower than what’s offered for the 30-year option.
In the state of Kansas, rates for both types of mortgages have followed a similar pattern over the last year. These rates had a gradual rise beginning in September of 2017 until they reached a peak in April of 2018.
Then after a short drop and spike, they have been on an overall downward trend. Throughout July, 15-year fixed rates remained in the range just above 4%, with 30 year fixed rates hovering slightly above 4.5%.
The trends and specific rates throughout the state of Kansas have been in line with what’s happened across the rest of the United States. For comparison, rates went above 6% back in 2008 and took several years to get below 5%.
Taking Different Financial Factors Into Account
Buying a home is the largest financial decision that most people will ever make. So prior to finalizing it, you can greatly benefit from fully evaluating your entire financial situation.
A great starting point is reviewing your credit score. Addressing any discrepancies or other issues can help you qualify for the best rates, regardless of the mortgage duration you pick.
Retirement is another factor that can play a key role in this decision. If you’re closer to the end of your career than the start, the number crunching you do with the help of a professional may lean in favor of a shorter mortgage length.
You will also want to think about your personal financial goals and overall attitude towards money. Not everyone is following the same path in life, which is why you should pick the type of fixed rate mortgage that truly aligns with your finances.
Picking a mortgage doesn’t mean you’re permanently stuck with that specific duration. Not only can you pay off a mortgage in less time than its stated term, but you can refinance from a 30-year mortgage into a 15 year.
Choosing the Best Option
Everything covered above shows just how many factors influence the decision between the two main mortgage lengths. What’s right for one Kansas home buyer may not be ideal for another.
The best way to correctly answer the question of a 15 vs 30-year mortgage is to work with a trusted lender. At Metropolitan Mortgage, we’ve been assisting buyers for more than twenty years.
Enlisting the help of our team means working with a locally owned and operated business. Being a multi-year Five Star Award winner puts us in the top five percent of all local mortgage professionals.
We make it easy to start the process of selecting your ideal mortgage. All you have to do is use our website to request a free personalized quote.