15-year vs. 30-year Mortgage: Which Is Right For You?

Though there are a wide variety of mortgage options available, the two most popular types of loans for consumers are the 15-year and 30-year mortgages. And, while there are advantages and disadvantages to both options, determining which mortgage is right for you will ultimately depend on your circumstances.

In short, a 15-year mortgage means a lower interest rate but a higher mortgage payment, while a 30-year mortgage means a higher interest rate but a lower mortgage payment. So, how can you determine which is best for you?

January 23, 2019

Though there are a wide variety of mortgage options available, the two most popular types of loans for consumers are the 15-year and 30-year mortgages. And, while there are advantages and disadvantages to both options, determining which mortgage is right for you will ultimately depend on your circumstances.

In short, a 15-year mortgage means a lower interest rate but a higher mortgage payment, while a 30-year mortgage means a higher interest rate but a lower mortgage payment. So, how can you determine which is best for you?

Let’s take a look at some factors to consider while making your decision.
The 15-Year Mortgage
The most obvious benefit of a 15-year mortgage is that you will pay off your home in half the time it would take with a 30-year mortgage. And, since the payments on a 30-year loan are stretched out over time, you’ll end up paying more interest until your final payoff date.

Knowing this, the most important factor to consider first is affordability. By comparing the monthly payments between a 15-year mortgage and a 30-year loan of the same size, if the number is still within your budget, then a 15-year mortgage may be right for you.

For those who are still unsure if higher payments are affordable, there are some other factors that may help you weigh your decision. Below is an overview of the pros and cons of a 15-year mortgage:

Pros of a 15-year mortgage:
- Pay off your mortgage faster
- Lower interest rate
- Pay less interest over the life of the loan
- Build equity quicker

Cons of a 15-year mortgage:
- Higher monthly payment
- Less extra cash each month
- Will qualify for a lower loan amount

While no one enjoys paying interest on a mortgage, if you can’t afford the payment that comes with shorter-term loans such as the 15-year mortgage, then this may not be the right choice for you.
The 30-Year Mortgage
Since you will be paying back your loan over a longer period of time, many homebuyers choose the 30-year mortgage for the simple reason that it comes with the lowest monthly payment.

However, the 30-year mortgage is not black and white—and it’s important to understand both the advantages and disadvantages:

Pros of the 30-year mortgage:
- Lower monthly payments
- More cash for savings/retirement
- Qualify for a higher loan amount

Cons of the 30-year mortgage:
- Higher interest rate
- Pay more interest over the life of the loan
- Builds home equity slowly

So, if cash flow is your biggest concern or your income tends to vary each month, the 30-year fixed-rate loan might be your best option.

There are many factors that play into determining which option is best for you—but it’s important to keep your personal needs in mind. If you’re still unsure about which mortgage option is for you, you can check your potential monthly payments by entering the specifics of your situation into our mortgage calculator!
Further Resources
Deciding on which mortgage option is best for you is a big decision and one you shouldn’t have to make alone. The best way to resolve your questions about 15-year and 30-year loans is to bring them to your local loan officer. Not only can they look at your finances, they can also help determine which option will best help you meet your financial goals.

At USA Mortgage, our team of licensed loan professionals is here as your resource to help refinance your current home or help purchase a new one. For more information, stop by a USA Mortgage branch near you, visit our website or call us toll-free at 888-250-6522