15 vs. 30: Choosing Your Mortgage Term

The length of your mortgage term shapes your monthly costs, your total interest bill, and how fast you build equity.

That’s why 30-year mortgages are typically more popular than 15-year loans. Spreading payments over time lowers monthly costs and gives you more breathing room in your budget.

But what you save today could cost you significantly more tomorrow, so it’s worth taking a closer look.

Comparing Mortgage Terms

30-year mortgage costs less per month, so they’re not as restrictive on your budget. You have wiggle room for retirement savings and other expenses — but there is a tradeoff. 30-year loans typically carry higher interest rates, and there’s more time for interest to accrue.

A 15-year mortgage gives you less time to pay off the loan, which means monthly costs can be much higher. But lower interest rates and a shorter term can save you thousands of dollars in interest long term. Plus, you build home equity faster because a larger portion of each payment goes directly toward your principal balance.

Choosing the Right Option

Either loan term can be beneficial depending on your circumstances and what you can comfortably afford. If your income is ample, reliable and backed by solid savings, a 15-year loan may be preferable. But if your income fluctuates or your budget is already stretched thin, a 30-year term may be a better option.

Keep in mind, a 30-year mortgage can also be paid off early by making extra payments toward your principal. This can also reduce your total interest costs.

The difference? Where a 15-year term obligates you to pay more each month, a 30-year loan does not. This gives you the opportunity to get the flexibility of a longer term with the option to pay it down faster — reducing long-term interest costs without locking yourself into higher payments. Just make sure that you aren’t subject to any prepayment penalties.

Ready to explore your mortgage options? Reach out to talk through which option makes sense for you.