Is a 15- or 30-year Mortgage Right for You?
That’s a good question because there are both pros and cons to selecting a 15- or 30-year mortgage and everyone’s financial situation is unique.
There is a lot of talk right now about mortgage interest rates, but if you’re preparing to buy a home, you’ll need to look at more than mortgage interest rates, you also need to consider loan types and terms.
If you can afford the payment on a 15-year mortgage, the long-term interest savings are superior. But the lower monthly payment of a 30-year mortgage could offer you more flexibility if your financial situation changes in the future.
Pros of a 15-year mortgage
There are several advantages to getting a 15-year mortgage.
- Quicker loan payoff. You’ll pay off your home loan in half the time, compared to a 30-year loan.
- Lower interest rate. Borrowers typically pay lower interest rates for 15-year loans.
- Faster equity growth. More of your payment goes toward principal and less toward interest.
The primary trade-offs of a 15-year mortgage are:
- A higher monthly payment in comparison to a 30-year mortgage.
- You may not qualify for the same amount of loan because of the higher monthly payments.
- With larger payments, you will have less flexibility for reaching other financial goals, like building your emergency savings or even travel.
Advantages of a 30-year mortgage
“The main advantage of a 30-year mortgage is that it stretches out the repayment, making it feel like the house is more affordable,” said Sr. Vice President and Loan Officer Vicky K. Halvorsen. “With a 30-year mortgage you can also pay more toward your mortgage if you’re comfortable; something that would be more difficult to do with a 15-year mortgage.”
Generally, it is easier to qualify for a 30-year mortgage because of its smaller payments. And there is more room in your budget to achieve other financial goals.
Cons of a 30-year mortgage
- Slower growth in home equity than a 15-year mortgage
- More total interest paid over the life of the loan
- A higher interest rate than a 15-year mortgage
How to determine what’s the best mortgage loan for you
Some of the factors to consider are:
- Your budget and amount of payment you’re comfortable with
- Amount of money you have set aside for emergencies
- Age may be a factor; for instance, if you’re retiring in 15 years, you may be more comfortable doing so without a mortgage payment.
- If you’re a first-time homebuyer, a 30-year mortgage can be a good choice, so you give yourself some more wiggle room in your budget
The best way to look at your holistic financial picture and loan options is to speak to a mortgage lender with First National Bank. There is never a fee to consult a lender and their knowledge about loan products will help you make a decision that perfect for you.
- mortgage loan