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15 Year Vs. 30 Year Mortgage

Whether you have just made the decision to purchase your very first home, or if you have built some serious equity in your current home and are looking to upgrade, buying a home should be an exciting time in your life!

Sometimes, when it comes to choosing your mortgage, the process can put a sour taste in your mouth.  How do I pick a lender?  Do I use a fixed rate or adjustable rate?  Do I want a 15-year mortgage or a 30-year mortgage?  These are all questions that can be answered very easily WITHOUT taking the excitement out of purchasing a new home.  In this article, we are going to discuss the pros and cons of both a 15-year and a 30-year mortgage.  Being the 30-year mortgage is the more commonly known mortgage; we will discuss that one first.

The first pro is a lower monthly payment towards your mortgage.  This is obviously a huge factor in determining what type of mortgage to get.  Why?  It gives you the opportunity to afford the house with the extra bedroom that you have always wanted.  It gives you the opportunity to afford the house with a man-cave in the basement.  Whatever it is that you are looking for in a home, a lower monthly payment makes your dream home more affordable!  The second pro is more write-offs.  When it comes to the ever so dreaded tax season, wouldn’t it be nice to get a little more back than you did last year?  Of course it would.  Interest paid on a mortgage loan is tax-deductible.  You pay more interest with a 30-year mortgage so you will be able to write off more than if you had a 15-year mortgage.  More write-offs means less of a tax liability for you.  The third pro is more money in your pocket!  With a lower monthly payment and more tax write-offs, that leaves you with more money in your pocket.  You will have more money to put in savings, pay off debt, go on a vacation, or really whatever you want to do with having extra cash each month.

Now, onto the 15-year mortgage.  For starters, you are paying off your home in literally half the time compared to a 30-year mortgage.  This is an extremely beneficial option if you plan to stay in your home for many years.  For example, this is the last home you are going to buy and you eventually want to retire.  You are obviously not going to want to be making a house payment while you are retired.  But even if retirement isn’t anywhere in the near future, imagine the financial freedom of not having a monthly mortgage payment.  The second pro is more equity in your home.  The more your mortgage amount decreases and your house value increases, the more equity you accrue.  Your mortgage amount drops significantly faster with a 15-year loan versus a 30-year loan, thus, more equity in your home in a shorter amount of time.  A third pro of a 15-year loan is paying less interest.  We all know how quickly interest can add up, which makes it even more annoying to have to pay considering it doesn’t bring your loan amount down any.  To simplify, paying less interest can save you a very large amount of money in the long run.

To conclude, a 15-year mortgage might be the perfect option for some and be a bad option for others.  The same goes for a 30-year mortgage.  So, before choosing between a 15-year mortgage and a 30-year mortgage, sit down and go through your financials.  Does the monthly payment fit in your budget?  What are your long-term financial goals?  What other debts and bills do you have?  When do you plan on retiring?  How long do you plan on staying in the house?  All of these are questions that can help you determine whether a 15-year or a 30-year mortgage is right for you.

The FM Team would love the opportunity to sit down with you and go over all of these options to help get you into your dream home with the most affordable payment possible.


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