I. Getting Started

Below are a few key questions to consider, 15 year vs 30 year mortgage:

• Do you have an emergency fund already established?
• How close are you to retirement?
• Have you maxed out your retirement plan contribution?
• Do you have any high-interest debt? If so, then how much?
• Are you relying on one or two incomes to support your monthly mortgage payment?
• What can you comfortably afford? Is that the same as the amount for which you’re approved?
• What are your financial goals?

II. 30-Year Mortgage

A 30-year fixed-rate mortgage may be ideal for those with moderate income and plenty of working years ahead of them. Monthly payments on a 30-year mortgage are smaller because the loan term is longer. Below are the upside and downside with a 15 year vs 30 year mortgage.

Upside

• Afford a little more home, when an extra bedroom or utility space would better suit your needs
• You have the option of making additional payments toward the principal which will shorten your loan term.
• Use the monthly savings to:
  • Build an emergency fund to cover loss of income or other life-changing event
  • Make monthly contributions toward other investments, including retirement

Downside

• You may pay more in interest over the life of the loan
• You may build equity at a slower rate because more of your payment goes towards interest
• You may make mortgage payments for as many as 15 more years, depending on whether you make any extra payments
• You may have a higher Interest rate on a 30-year mortgage than a 15-year mortgage
• You could potentially convince yourself to “take on too much house,” possibly right up to your debt-to-income (DTI) limit, with very little or no money remaining to invest elsewhere.

III. 15-Year Mortgage

A 15-year may be suitable for those who’ve already maxed out retirement contributions, plus have a nest egg and no other high-interest debt. Monthly payments on a 15 year vs 30 year mortgage are higher because the loan term is shorter.

Upside

• Generally, enjoy lower interest rates because the loan is less risky for the lender
• Pay less interest over the life of your loan
• Complete loan repayment in as little as half the time compared to a 30-year term
• Build equity faster and have the option to take out a home equity loan or line of credit to:
  • Cover renovation projects
  • Buy an investment property

Downside

• You may commit to a higher monthly payment for the life of the loan.
• You may have less money for other investments such as a retirement account.
• You may have less of a cushion to absorb loss of income or other significant life change.

Ready to explore your options, 15 year vs 30 year mortgage?

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