Yale Roth M.A., M.Ed

This is a great question.

Looking at today’s mortgage rates, especially the mortgage rates for the shorter term mortgages – like the 10 year fixed and 15 year fixed mortgages – you say “Holy Cow!  Those mortgage rates are really low!”

It’s true – the mortgage rates are very low right now.

However, from a mortgage affordability standpoint, can you afford to make the mortgage payment?

A 10 year fixed mortgage and 15 year fixed mortgage are great loans.  The mortgage rates are low and the mortgage will be paid off in 10 or 15 years.

For those of you in your 40s and 50s, you can have your mortgage paid off by the time you retire.  Pretty sweet.

However, look at the mortgage payments.  The principal and interest payments for the 10 year fixed mortgages and 15 year fixed mortgages are going to be higher than the 30 year or 20 year fixed mortgages – even though the mortgage rate will be LOWER.

The question you want to ask is: “Can you afford a 10 year fixed or 15 year fixed mortgage payment for the next 10 or 15 years?”

You want to consider where your income is going to be in the future.  If you are you self-employed will your income fluctuate to a point where it may become stressful to make the mortgage payment?

Are you close to retiring, going on a fixed income and your monthly cash flow may be dropping?

Mortgage affordability is a big question.  Don’t be falsely attracted to the very low 10 year fixed mortgage and 15 year fixed mortgage rates.

Focus on being able to afford the mortgage payment.

If you can comfortably afford the mortgage payment for the 10 year fixed mortgage and 15 year fixed mortgage, then they are going to be the best and cheapest mortgage type.

If you’re unsure that you’ll be able to afford the 10 year fixed mortgage or 15 year fixed mortgage payment, consider a longer term mortgage, like a 20 year fixed mortgage or 30 year fixed mortgage.

You always have the option to prepay against these mortgages (as long as there is no prepayment penalty), which will effectively reduce the loan term, drop your net effective mortgage rate and save you thousands of dollars in mortgage interest you won’t have to pay.

Mortgage affordability – to see what will happen to your 30 year fixed mortgage by applying extra money to the mortgage principal, go to my biweekly mortgage calculator.

The mortgage calculator will show you how much you money you can save by prepaying the mortgage.  Enter the amount you are comfortable adding to your mortgage payment to reduce the principal balance and you’ll see how many years you’ll take off your mortgage term!

Related Posts:

• Does It Make Sense To PrePay Your Mortgage?
• My Top 3 Mortgage Loan Types
• 4 Mortgage Loan Types To Refinance Into In 2012
• Mortgage Questions – “Is A 30 Year Fixed Mortgage Better Than A 15 Year Fixed Mortgage?”
• Mortgage Questions – “What’s The Difference Between A 30 Year Fixed Mortgage And A 10 Year Fixed Mortgage?”