15-Year Fixed-Rate Versus 30-Year Fixed-Rate Mortgage Comparisons
This BLOG On Comparison Of 15-Year Fixed-Rate Versus 30-Year Fixed-Rate Mortgage Was Updated On July 3rd, 2019
Of the two mortgage term options is the 15-year fixed-rate mortgage or 30-year fixed-rate mortgage period better?
- There are benefits of 15-year versus a 30-year fixed-rate mortgage
- These are the two common periods over which people choose to pay their mortgages, so what is the difference?
- Obviously, the longer you take to pay, the less your monthly repayments will be
- But what are the pros and cons of repaying a loan over a shorter or longer period?
Lower Mortgage Rates On 15 Year Versus 30 Year Fixed Rate Mortgage
Homeowners can choose a 30 year fixed mortgage rate versus a 15-year fixed mortgage rate. Borrowers can make extra monthly payments and get the loan paid in full in 15 years. However, mortgage rates on 15-year term loans are generally lower than 30-year fixed-rate mortgages. However, mortgages usually have the advantage of lower interest rates and the interest payments are usually tax-deductible for a normal family home.
Pros And Cons Of 15 Year Versus 30 Year Loans
Here are some pros and cons of each.
30 Year Fixed Rate Mortgage Loans
- The vast majority of mortgage terms are 30-year fixed-rate mortgage
- This generally means that it will take 30 years to repay the loan
- It does not mean that you pay the same interest rate for these 30 years because 30-year adjustable-rate mortgages can be arranged with a lower rate for the first 5, 7 or 10 years
- The rate is then adjusted to the standard at the time the fixed-rate period ends – that could be a higher or lower rate
The 15 Year Mortgage Term
Some people prefer to take a mortgage for over 15 years.
- By doing this they will make higher monthly repayments but will pay less interest over the period of the loan
- They will also own their home outright in half the time
- Homeowners also build equity in their home faster, so they will find it easier to refinance if they wish to, or make more when they sell it to upgrade
With a 15 year term, the mortgage will be amortized over the entire 15 years with a fixed rate of interest.
- Homeowners will know exactly what they are paying without the worry of rates increasing above an affordable level
- Homeowners can refinance their 15-year mortgage to 30-year mortgages if they are struggling to make their monthly mortgage payments
Benefits Of 15-Year Fixed-Rate Mortgages
Among the advantages of a fixed-rate 15-year mortgage are:
- Same payment every month for the entire 15 year mortgage period
- Home paid for sooner
- Quicker increase in equity
- Same mortgage available to 50-year-olds as for 20-year-olds depending upon the type of job
- The less overall interest paid
Which Is Best For Homeowner?
The above mortgage term options may or may not fits the homeowner’s needs, depending upon their personal financial situation.
- A 30-year term might enable homeowners to buy a larger home
- Or it might even be necessary to buy a home at all!
The main differences between a 15 or 30 year fixed rate mortgage are that
- You can buy a larger home or pay less each month for over 30 years, but
- you can own your home 15 years sooner over a 15-year mortgage term
- There are alternative mortgage term options but these are the most common