The Pros and Cons of a 15 Year and 30 Year Mortgage

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If you decide that a mortgage is the way to go for refinancing or purchasing your home, the next step is to decide the term. 15 year and 30 year mortgages are the most common terms that you can choose from. To help you determine which one is right for you, we have shared what we think are advantages and disadvantages to consider before reaching a decision.

15 Year Mortgage

Pros of a 15-Year Mortgage

  • Minimize total borrowing costs with interest rates typically lower that a 30 year mortgage
  • Eliminate debt faster with each monthly payment
  • Spend less in interest over the life of the loan starting in the first year
  • Quickly build equity in your home
  • There will only be 15 years of mortgage payments compared to 30, allowing borrowers to enjoy their paid-off home earlier

Cons of a 15-Year Mortgage

  • First time home buyers may lack the finances to qualify
  • Higher locked-in monthly payments could leave little extra cash flow for other purchases
  • Higher debt-to-income ratio may prevent qualification for other loans

If you want to spend the least amount on interest, a 15-year mortgage will help you generally pay a lower rate. However, if the 15-year monthly payments are too expensive for your budget, you may want to consider getting a 30-year loan.

30 Year Mortgage

Pros of a 30-Year Mortgage

  • Lower in most cases monthly payments
  • Could provide extra cash for savings, retirement, and other needs and expenses
  • Pay extra each month (when possible) towards the principle balance to help reduce the effective term of the loan

Cons of a 30-Year Mortgage

  • Frequently higher interest rate
  • Loan balance remains higher for longer
  • Spend more in interest over the life of the loan
  • Home equity is usually slower to build
  • Monthly payments over a longer period of time

Even though the 30-year mortgage could have a higher fixed rate, it reduces the amount you pay each month and it gives you the flexibility to pay for other expenses and an additional amount if you want to pay the loan off faster.

Do you need help deciding which option is best for you? Let us know!

Let Camino help you. We want our members to find the best option that works for their needs. We offer many options for those looking to purchase or refinance a home. Please give us a call at 800-835-3400 to speak with one of our Member Advisors, or contact us for more information.  NLMS ID 666196