Home borrowers for decades have wondered whether or not to take out a 30 year loan or a 15 year mortgage. Determining the right choice for you boils down to one simple question: Are you a disciplined saver?

Fifteen-year real estate mortgages offer borrowers two huge advantages. The interest savings on a modest mortgage saves borrowers hundreds – yes, hundreds – of thousands of dollars in interest payment savings when compared to a 30-year loan. Plus, you pay off your house in half the time. What’s not to like?

The issue is that 15-year mortgage payments are a lot more expensive than a comparable loan that lasts 30 years – not twice as much, but sometimes 50 percent more. Borrowers think to themselves, what if I lose my job and my savings isn’t enough? I’d lose my house! Better to take the safe route of the 30-year mortgage and just make extra payments every month.

The problem is that most borrowers – 97 percent, according to the Federal Deposit Insurance Corporation (FDIC) – don’t make extra payments. When faced with the dilemma of paying bills, putting in a new kitchen or hiring a lawn service versus sending in extra money to your lender, guess which wins?

If – and only if – you are part of the 3 percent who are committed to making extra payments every month, then taking out a 30-year loan is your best bet (higher tax deductions but flexibility in case disaster strikes). Not realistic? Then strongly consider the 15-year loan and reassess your budget. Are you willing to buy less house but reap greater financial security?

If you find yourself struggling, refinancing to a 30-year loan may be possible. But don’t fool yourself into thinking that extra payments are a definite, when for most, they’re not.

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