Many would assume that paying off your debt as quickly as possible would be a no-brainer. That is why many people consider 15-year mortgages over a 30-year. After all, wouldn’t be nice to have your home paid off in 15 years?
While this certainly seems to be clear logic, the reality is that with interest rates hovering around 3.25% (3.44% APR) on a 30-year VA home loan, you’re better off putting the money you’d spend on a higher house payment on a different type of investment.
Let me explain.
Say that your house payment on a 30-year loan would be $300. For the sake of simple math, lets say that if you were to finance your home utilizing a 15-year loan, that your payment would be $600.
If you dilligently pay off your 15-year loan, that’s great! But, if you choose to finance your home utilizing a 30-year loan, you can be putting that extra $300 per month into another type of investiment that will likely make you more money than you are paying with your 3.25% (3.44% APR) interest rate on your loan.
Essentially, you could take longer to pay off your home, while growing your “extra” money, a situation that has been made possible by the record low interest rates.
Plus, with a VA home loan, a 30-year loan may make it more likely that you could allow a future seller to assume the loan with the interest rate you currently have. And, since interest rates will likely go up in the future, this could be a major selling point. Assumptions on 15-year loans are not quite as popular.
Ready for a VA home loan? Give us a call at 800.920.5420.