Fixed-Rate Mortgage: Short Term vs Prepaying

Most people that get a fixed rate mortgage end up getting a mortgage that has a 30 year term. However, if you want to pay off your mortgage in a shorter amount of time, you can choose between getting a shorter term or prepaying your 30 year mortgage. Here are a few things to consider about which method you should use.

Flexibility

If you value flexibility in your monthly payments, you might want to consider prepaying. This way, you will only be obligated to make a payment that is amortized on a 30 year payment schedule. This means that when you are having a good month financially, you can prepay some of your mortgage. When you are having a bad month, you can just make the minimum payment.

Forced Payments

Some people prefer to get a mortgage with a shorter term, such as 15 years, because it forces them to make additional payments. Your required monthly payment is going to be higher with a 15 year mortgage than it is with a 30 year mortgage. This means that you are going to be forced to put more money towards your mortgage every single month. Some people prefer to force themselves to do it because they do not have the self-discipline to pay extra otherwise.

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