The Pros And Cons Of A 15 Year Mortgage Vs A 30 Year Mortgage

Dated: 04/14/2016

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When applying for a mortgage loan there are a number of decisions you will need to make. First you have to pick a lender and then decide which mortgage is right for you. You most likely will be offered both fixed and adjustable rate loans. Once you decide which one of these is the best for you then you will have to make the biggest decision of all! 

We are going to specifically explore the pros and cons of a fixed mortgage in both 15-year and 30-year options. Please note that whichever term you choose you can still choose to pay off your mortgage sooner than the specifications of the loan.

Advantages of a 15-Year Mortgage

  •  Pay Off the Mortgage Quicker. One of the biggest advantages of the 15-year mortgage is the ability to pay it off quickly. Mortgage payments usually take up a huge chunk of your spendable income. If your plans include staying where you are long-term, financial freedom, preparing for retirement, or working less hours in the future the satisfaction of not having a mortgage payment will appeal to you!

  • Less Interest Paid to Lender over Term of Loan.  Interest adds up quickly on any type of loan. Your credit score and amount of down payment affect the rate of interest your lender uses to establish the amount charged on your loan. The shorter years of your mortgage note, the lower the interest rate. Choosing a 15-year loan over a 30-year loan will save you tons of money in the long run.

  • Equity Building. Equity is the amount between the market value of your home and the amount you owe on it. You will be paying down the principal amount owed on your home quicker with a 15-year mortgage vs. a 30-year mortgage so your equity builds quicker. Because your interest rate is lower you will accrue value in your home faster.

Benefits of a 30-Year Mortgage

  • Lower Monthly Payments.  Choosing to go with a traditional mortgage term and keeping your payment lower can provide peace of mind in an oftentimes unstable economy. The payments are lower; therefore, the burden is less if you have an unforeseen reduction in your monthly income.

  • Extra Cash in your Monthly Budget. Going with a 30-year mortgage can afford you to keep extra cash in your pocket. By doing so it allows you options to build up your savings, pay off other debt, or make home improvements to help increase your home’s value. After accomplishing your personal money goals, you may decide to increase the principal amount you pay each month. This will allow you to pay down your mortgage quicker, but still control the committed amount if you need to as well.

Last Thoughts

Cautiously review the pros and cons of both a 15-year and 30-year mortgage. You are responsible for the monthly payment so consider your options taking into account both your short and long-term scenarios. If you have any doubt about being able to continually make the larger payment of a 15-year mortgage, choose the smaller payment 30-year term. You can more readily adjust the amount you pay up than having the stress of coming up with the higher amount you would be committed to.

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Sam Lepore

Sam Lepore is a Realtor with Keller Williams in Moorestown, NJ. Call him today at 856.297.6827 ....

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