Choosing Your Mortgage – Have Your Cake and Eat it Too

When it comes down to it, the decision should always be a personal one after you ask yourself the following questions:

• What can you afford monthly?

• How long do you want to be repaying the loan?

• What do you have planned for your future?

The truth is, you always have the option of the 30-year loan. With a 30-Year Fixed Mortgage, you'll typically have a lower monthly payment and a higher interest rate. So in the long run, you'll pay more interest over the life of your loan than if you were to go with a 15-year strategy.

You can get ahead of your 30-Year Fixed Mortgage by paying more than your monthly payment with an additional principal payment on your loan each month. This will allow you to pay your loan off quicker, and still have the flexibility of a lower monthly payment. This lower monthly payment can satisfy your lifestyle without overextending your finances in the case of an emergency. At most financial institutions you won't be penalized for paying more than your monthly payment; however, it's important to check to be sure.

While treating your 30-year mortgage like a 15-year mortgage seems like the ideal situation, many homeowners have this intention and don't actually follow through with their plan. Life happens - babies are born, jobs are lost, cars break down, etc. Here are a few ways to help you stay on track and treat your 30-year loan like a 15-year loan:

1. Put your payments on auto-pilot

   Get in the mindset of making two payments to your mortgage each month. Make your normal mortgage payment with your first round of paycheck(s) and your principal payment with your second round. Set up the payments as recurring so you don't have to go in and schedule them manually each month. When you get in a bind or need to fall back on your principal payment as a safety net, simply cancel the recurring payment for the particular month.

2. Budget your principal payment as a necessity

   Treat your monthly principal payment as a necessity in your finances, not as an optional payment. By working this payment into your financial budget from the start, it'll make you less likely to spend those funds throughout the month.

3. Make a quarterly payment

   If you prefer to make one larger payment instead of several small principal payments, make one extra full mortgage payment quarterly. This will still have an impact on reducing the amount you owe and significantly shorten the life of your loan.

Of course, when it comes down to making your final decision, the best action step is to sit down with a mortgage specialist to discuss all of your options. There's certainly not a one size fits all option when it comes to mortgages. It all comes back to your short-term and long-term financial goals and what fits into your monthly spending.