Is A 30 Year or 15 Year Mortgage Right For You?

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My name is Kathy Johnson and I am officially the manager of branch relations.

Differences between a 30 year and 15 year mortgage?

The basic difference between a 30 and 15 year mortgage is the length of time that you’re paying back the money. Obviously the 30 year mortgage covers a 30 year period, so because of the time cost of money a 30 year mortgage is going to cost you a lot more in interest charges than a 15 year would.

Why would a consumer choose one over the other?

This would be more my opinion. You’d want to look at what other debt you have, because typically your mortgage is your lowest interest debt. So if you have student loans, credit cards, even car loans, you might want to take the 30 year term and have the lower monthly payment so you could use those extra funds to pay down your higher interest debt. Then once you have your higher interest debt paid off then you can use the extra money to either refinance to a 15 or you could use the extra money to pay extra on your 30 and pay it off more quickly.

Which one is more common and why?

The 30 year is much more common than the 15 year and it has to do with the monthly payment. The 30 year mortgage is going to have a lower payment than the 15 year mortgage. So most borrowers look at that payment and that’s what they’re wanting is the lowest payment they can get.

I think as you get older borrowers that’s where you see the 15 year come into play. They want to get their house paid off prior to retirement. Or as you get older, hopefully, you get a little bit more financially stable so they’re able to afford the 15 year payment knowing it’s going to cost them less in the long run to have that.

So the 30 year is more common.

Final Thoughts?

You just have to factor in a lot of different things; what you’re comfortable with. Think about the tax implications because the interest on your mortgage is a deduction you can take on your taxes. So you’re going to pay more interest on the 30 year than you are a 15. So if you need a tax deduction that may be something you want to factor into your decision also.

But the most important thing when you’re trying to decide whether to finance on a 30 year or a 15 is just make sure you’re comfortable with your payment because the last thing you want to do is to be late on your mortgage payment.

End Transcript

Key Takeaways for Borrowers

30 year mortgages are more common because they offer a lower monthly payment to borrowers.

A 15 year loan offers a higher monthly payment, but less interest over the life of the loan.

The most important thing when you’re trying to decide between a 30 year or a 15 is to make sure you’re comfortable with your payment.