How 30 Year Loans Differ from 30/15 Mortgage Loans - The Bills.com Blog

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How 30 Year Loans Differ from 30/15 Mortgage Loans

Question: Why do lenders offer a 30/15? Where can I get a 30yr fixed loan?

Answer: “30/15,” or a thirty year mortgage payable in 15 years, is a type of balloon mortgage, meaning that the loan is amortized over a longer period of time than the actual term of the loan, but at the end of the term of the loan, the borrower is required to pay the remaining balanceof the loan in a single “balloon” payment. In the case of a 30/15 mortgage, the loan is amortized as if it were a 30 year mortgage, however the actual term of the loan is only 15 years. After making payments for 15 years, the borrower must pay the remaining principal as a single balloon payment.

This type of loan can benefit some consumers for several reasons. First, interest rates on 30/15 loans tend to be slightly less than standard 30 year loans, making monthly payments a little lower. Also, if you are able to save enough money to pay off the balloon payment when it comes due, you can save a lot in interest, as you are only required to pay off the unpaid principal. Many businesses choose balloon loans when purchasing property, as the increased cash flow as the business grows allows then to pay the balloon

payment when it comes due. The low payment provides flexibility while the business is growing, with the balloon coming due after the business has had time to grow. Another possible advantage of balloon loans is that if prevailing interest rates are lower when the fixed term ends, borrowers may be able to refinance their loans at a lower interest rate.

Unfortunately, predicting interest rates 15 years in the future is almost impossible, so the interest rates are just as likely to have increased as to have decreased when the balloon payment comes due.

If you are purchasing a new home, most financial advisors recommend a 30 year fixed loan over a 30/15. Since most consumers will not be able to pay off the balloon payment when it comes due, they will be forced to refinance their loan. It is frequently better

to lock in a rate and a payment that will stay the same rather than gambling on interest rates being lower when your 15 year fixed term ends on a 30/15. In most cases, the difference in interest rates offered on the two types of loans is not significant enough to have a major impact on the amount of your monthly payments.

You can apply with Bills.com's lender network .

If you would like to learn more about mortgages, and the various types of loans available, I invite you to explore the Bills.com mortgage page.

I hope that you are able to find an option than meets your needs.

I hope this information helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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