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The Power of the 15 Year Fixed Kelowna Mortgage

Jacklin SmithOne of the classic arguments among Kelowna notary professionals is whether it is more prudent for home buyers to select a 15 year or 30 year fixed mortgage. While there are compelling arguments from both sides; here are three sensible reasons why the 15 year fixed rate mortgage is the hands down winner.

1. Interest Savings: This one should be pretty obvious, but when you crunch the numbers it is even more astounding. Compare two similar 5 percent fixed rate home mortgages for $100,000; one for 30 years and the other for 15. Making regular monthly payments, the amount of interest paid over the life of the 30 year mortgage comes to $93,255. That is almost equivalent to the entire amount of the original loan! In comparison, the amount of interest paid over the life of a similar 15 year mortgage is $42,344. That amounts to more than a $50,000 savings in interest payments! I don’t know about you, but I would rather have that money in my pocket than hand it over to my friendly neighborhood corporate bank.

2. The Power of Immediacy: One of the biggest arguments for choosing a 30 year mortgage over a 15 year goes something like this: “I can always make additional principal payments each month but I like the flexibility in knowing that if I have an emergency, I can just make the regular payment”. The truth of the matter is that emergencies will always come up. Whether it be braces for the kids, tires for the car, a new roof for the house; something will always come up. So what starts out as skipping an additional principal payment for a month or two can quickly turn into 1 or 2 years. Having a slightly higher monthly payment will automatically force you to become a better saver and budgeter.

kelowna-notary3. Financial Freedom: Every time you sign your name to a mortgage you are receiving more than just a loan, you are taking a risk. Risk comes in a lot of different forms and can greatly affect your ability to make the necessary monthly payments. At a moment’s notice almost anyone can lose their job, suffer a debilitating injury or fall victim to a natural disaster. So it boils down to a simple question: would you rather have these risks and all of the stresses that come with them for 15 years or for 30?