ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The 15 year mortgage will have a lower monthly payment.
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The 15 year mortgage will accrue less interest.
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The 15 year mortgage will increase your credit score.
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There is no advantage. It is just personal preference.
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Detailed explanation-1: -People with a 15-year term pay more per month than those with a 30-year term. In exchange, they are given a lower interest rate. This means that borrowers with a 15-year term pay their debt in half the time and possibly save thousands of dollars over the life of their mortgage.
Detailed explanation-2: -A 15-year mortgage means you’ll pay less in interest due to a lower rate and also shorter term, and pay off your mortgage sooner, potentially freeing up room in your budget in the future. However, your monthly payments will be higher due to the shorter repayment schedule.
Detailed explanation-3: -A 15-year mortgage is designed to be paid off over 15 years. A 30-year mortgage is structured to be paid in full in 30 years. The interest rate is lower on a 15-year mortgage, and because the term is half as long, you’ll pay a lot less interest over the life of the loan.
Detailed explanation-4: -Because a 30-year mortgage has a longer term, your monthly payments will be lower and your interest rate on the loan will be higher. So, over a 30-year term you’ll pay less money each month, but you’ll also make payments for twice as long and give the bank thousands more in interest.