How to Decide Between a 30 Year Fixed and a 15 Year Fixed Mortgage Rate in California

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Arcus Lending

Dec 03, 2013, 12:35 ET


San Jose, CA (PRWEB) December 03, 2013 -- Shashank Shekhar, CEO of Arcus Lending, a California Mortgage Lender , in a recently published blog post evaluated the pros and cons of a 30 year fixed vs. a 15 year fixed mortgage loan.

While a 30 year fixed mortgage rate is the norm, there are multiple benefits associated with a 15 year fixed mortgage, provided the borrower understands the risks vs. the returns.

“There is huge saving on interest cost on a 15 year fixed provided a borrower qualifies for the loan and can make the payments on the higher mortgage amount. After all, a 15 year fixed mortgage allows a borrower to repay the loan in half the time, “said Shashank Shekhar.

In his recent blog post Shashank evaluated both the loan programs in detail to help potential borrowers make an educated decision.

Some of the benefits of a 15 year fixed loan are:

  • Interest cost savings: Currently the average rate on a 30 year fixed mortgage is around 4.375% and on a 15 year fixed it's around 3.375% for high balance conforming loan (loan amount >$417,000, also called Conforming Jumbo loans). In this scenario, a borrower could potentially, save $313,000 in interest cost with a 15 year fixed mortgage compared to a 30 year fixed. That is a huge saving in interest cost.
  • Loan pay off in half the time: Savings in interest cost also comes from the reduced loan tenor. And again there is the peace of mind of owning your home in 15 years vs. 30 years.

Some of the pitfalls of a 15 year fixed loan are:

  • Loan qualification: For the example above, the payment on a 30 year fixed is $2995.00 vs $4252.00 on a 15 year fixed, a difference of $1257.00 per month. This means that to qualify for a 15 year fixed loan, a borrower would need a monthly income of $11,450 while he would only need a $8,650.00 income to qualify for a 30 year fixed mortgage.
  • Increased payment liability: On a 30 year fixed, a borrower is required to pay a smaller payment with an option to pay extra towards principal if he can. On a 15 year fixed a borrower is required to pay a higher amount even if he runs into hardships.

Shashank Shekhar frequently blogs about mortgage on his highly rated blog. He is also the author of ebook titled “How to Shop Mortgage Rates Like a Pro”. This is available for free download at - http://www.arcuslending.com/ebook/.

About Arcus Lending:
Arcus Lending is a mortgage broker and a direct lender in California. They offer a variety of loan programs, quick closing and legendary customer service. They can be reached via email at Info(at)ArcusLending(dot)com and via phone at (408) 615-0655 or via their website http://www.arcuslending.com/. Watch quick video on the vision behind Arcus Lending.

Shashank Shekhar, Arcus Lending, http://www.LendingExpertBlog.com, +1 (650) 793-6833, [email protected]