A Comparison Between 15-Year and 30-Year Mortgages


If you’re considering a fixed rate loan, one of the questions to consider is whether you want the term to be 15 years or 30 years.

On its surface, the 30-year mortgage looks more attractive to many borrowers because the monthly payments are smaller. But the lower interest rates for a 15-year mortgage means you would actually end up paying considerably less over the life of the loan than you would for a 30-year mortgage.

A big consideration when you’re weighing the relative advantages of the two options is what you intend to do with the extra money from the 30-year mortgage’s typically lower monthly payments. 

When deciding which option is best for you, it’s important to do so within the context of your overall finances. Would the 15-year mortgage’s higher monthly payments represent a real hardship for you?  If so, a 30-year term might be a better option.  You could still make extra payments when possible without feeling the financial pressure of a higher monthly payment.

Some of it comes down to personal preference, of course. For you, paying more money over the span of a 30-year mortgage may be worth it, in exchange for the lifestyle that the money would enable you to afford. Or you may earmark the extra cash flow for a specific expense, such as your children’s college tuition or your own retirement. Or you could invest the additional cash — perhaps in another house.

You also need to make an honest assessment of your own capabilities. If you opt for a 30-year payment schedule so you can invest the extra cash flow, do you have the self-discipline to actually invest it rather than spending it?

There are many different considerations to take into account when deciding on a mortgage, and a mortgage professional can help you sort through them.   

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