15-year or 30-year Mortgage: What’s the Difference?

Buying a home is exciting! What’s not so exciting is the plethora of mortgage advice/opinions you might receive from friends or family—and not knowing what to do.

You’re not alone.

But while their advice is well-meaning, mortgages aren’t one-size-fits-all. So just because home loan option A worked for your best friend doesn’t mean it’s the right program for you.

One decision you’ll have to make involves getting a 15-year or a 30-year mortgage.

Need more information before making up your mind? We got you covered!

Benefits of a 15-year mortgage

1. Pay off the mortgage faster

We know what you’re probably thinking…duh! But we have to include the obvious because this is one of the biggest pros of a 15-year mortgage.

Maybe the idea of paying off a home over 30 years is overwhelming. Or maybe you’re getting closer to retirement and don’t want a mortgage during your golden years.

A 15-year mortgage works in these scenarios. And when you pay off a mortgage sooner, you free up cash for other important things. Save a bigger emergency fund, vacation more often, or finally put in that hot tub.

2. Build equity faster

Of course, paying down a mortgage sooner also means building equity faster. And let’s be honest, who doesn’t like equity?

3. Owe less interest

A 15-year mortgage doesn’t exactly benefit your wallet today…but it does in the long run.

Reducing a mortgage term by half means a higher mortgage payment. And naturally, this makes some people nervous. But if you’re able to swing the higher payment, a 15-year mortgage might be the most cost-effective option since you’ll pay less interest compared to a 30-year term.

Benefits of a 30 year mortgage

1. A lower monthly payment

Yes, it’s another “duh” moment…but you know the drill.

You’re stretching the loan term an additional 15 years, so yes, a 30-year mortgage provides the lowest monthly payment. And for a lot of people, that’s a good enough reason to choose the lengthier term.

A lower payment can equal more disposable cash to hit other financial goals.

2. Can help you purchase sooner

Truthfully speaking, a 30-year mortgage can put homeownership within reach sooner. Instead of waiting for your income or savings to increase, you can start building equity today.

As a tip: Don’t automatically think that you can’t afford a 15-year mortgage. These might be more affordable than you think.

When you talk about splitting a mortgage term by half, the mind assumes that the mortgage payment will double. But that’s not how it works. For example, the difference between a $200,000 mortgage at 4% interest over 15 years and 30 years is only about $500!

Takeaway

To get a 15-year mortgage or a 30-year mortgage, that is the question. But seriously, though, the best option truly depends on your circumstances and preference. Whatever you decide, the loan experts at Real Genius can help make homeownership a reality. Find a mortgage expert to get started!