15 vs. 30 Year Mortgages

Which is better: A 30-year fixed-rate mortgage or go for a lower-interest 15-year one?

Typically, 15-year mortgage allows you to pay off your mortgage quicker and save a significant chunk of money on interest. However, a 30-year may be a logical choice for most people because it has more advantages. Let’s take a look at the differences:

  • post1Payments are less with a 30-year mortgage which enables more consumers to qualify for home purchases.
  • Generally, you can make additional principal payments to pay off your loan faster without penalty.
  • A 15-year loan means you are committed to giving that extra money to your lender each month, whether you can really afford to at the time or not.
  • The higher payments of a 15-year mortgage make little sense if they keep you from building savings or contributing to a 401(k) plan, IRA or college fund.
  • The amortization schedule of 30-year fixed is back-heavy, with early-term payments big on interest and light on principal.
  • A 15-year fixed is always light on interest which lowers its taxpayer benefits.

While it’s true you gain more of a tax break from a 30-year loan, it shouldn’t be the main consideration when deciding on a term. The 30-year borrower pays less in yearly taxes because they pay significantly more in interest.

So it all comes down to choice and circumstances:

  • Choose the 15-year loan if you have the financial wherewithal to assume the payments. Your interest savings will be substantial and you’ll own your home faster.

The 30-year loan offers lower payments and greater flexibility. You can always choose to pay more on your mortgage when the money is available.

For more home tips, follow us on Facebook. Looking for a new home in the Kansas City area? Visit us at BHHSKCRealty.com!

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