The Pros and Cons of 15-Year and 30-Year Mortgages
Traditional fixed-rate mortgages are the most popular types of loan programs for borrowers because they generally involve an unchanging monthly mortgage payment that is easy to budget around. The most common fixed-rate mortgages are 15-year and 30-year loans, and while both of their interest rates are fixed over their lifetimes, they each offer different advantages and disadvantages for homebuyers. To help you choose the right loan for your budget, here are some of the pros and cons of 15-year and 30-year mortgages.
Advantages of a 15-Year Mortgage
15-year mortgages allow borrowers with steady finances to:
- Minimize total borrowing costs with lower interest rates
- Eliminate debt quickly with each monthly payment
- Spend less in interest over the life of the loan starting in the first year
- Quickly build equity for their next home or other purchases
- Refinance easier with a lower loan-to-value ratio
- Enjoy only 15 years of mortgage payments, meaning most borrowers will enjoy a paid-off home long before retirement age
Disadvantages of a 15-Year Mortgage
- First-time homebuyers may lack the finances to qualify.
- Higher locked-in monthly payments leave little extra cash flow for other purchases.
- Higher debt-to-income ratio prevents qualification for other large loans.
If you want to spend the least amount on interest, a 15-year mortgage will lock you in at the lowest rate possible. However, if the 15-year payment is too expensive for your monthly budget, you may want to consider getting a 30-year loan.
Advantages of a 30-Year Mortgage
Most borrowers opt for a 30-year mortgage, because they can:
- Enjoy lower, more affordable monthly payments
- Free-up cash for savings, retirement, and other needs and expenses
- Still qualify for higher loan amounts
- Pay extra each month (when possible) towards the principle balance thus reducing the effective term of the loan
Disadvantages of a 30-Year Mortgage
- Higher interest rate
- Loan balance remains higher for longer
- Spend more in interest over the life of the loan
- Home equity is slow to build
- Making monthly payments over a long period of time
While the 30-year mortgage has a higher fixed rate, it offers flexibility in that you could always pay an additional amount each month to help pay off the loan faster.
Find the Right Loan for You
At Butler Mortgage, we offer fixed-rate mortgages in terms ranging from 10 to 30 years that can be paid off at any time without penalty. Our over 25 years’ experience allows us to help you decide which loan type makes the most sense for you. Whether you are interested in taking out a 15-year or 30-year mortgage loan, we are happy to serve your needs. Contact us at 407-931-3800 and request a free consultation today.