Pros and Cons of a 15-Year Mortgage vs. a 30-Year Mortgage
If you’re trying to decide on what kind of mortgage you want for your home, here are some pros and cons of a 15-year mortgage versus a 30-year mortgage.
Purchasing a new home requires research and preparation. Most homeowners pay off their mortgages over time while the lender uses the mortgage as collateral. So it’s necessary to understand what mortgage options are available to the buyer. Here are some pros and cons of a 15-year mortgage versus a 30-year mortgage.
15-Year Mortgages
With a 15-year mortgage, the interest rate and monthly payments remain fixed throughout the entire life of the loan. At the same time, the 15-year mortgage has some disadvantages, as the interest rate can affect the borrower’s credit score and credit history.
Pros and Cons
Some pros that the 15-year mortgage has to offer is that the interest rate and monthly payments don’t change over the life of the mortgage. Additionally, you build equity more quickly because you pay down the principal balance more quickly than you would with a 30-year loan. Lastly, lenders see fewer risks with a 15-year mortgage, so they often charge lower interest rates.
As for cons, a 15-year mortgage has larger monthly payments than a 30-year loan, with payments running about 50% higher. You’ll also have to pay mortgage insurance if you paid less than 20 percent of the cost of the home for the down payment.
30-Year Mortgages
A 30-year mortgage consists of a 30-year period of payments to completely pay off your home loan. As with a 15-year loan, each fixed payment is scheduled monthly, and the interest rate and payments stay the same for as long as you have the mortgage. Although it’s significantly longer than a 15-year loan, it comes with its own pros and cons.
Pros and Cons
A 30-year mortgage comes with a handful of pros. Because of the longer paying period, the 30-year term allows the buyer to have more affordable monthly payments. This also offers flexibility by allowing the buyer to apply additional payments to their principals or schedule more than one payment per month, if they have the means.
However, because the payment period is so long, the buyer will pay more interest over time compared to a shorter loan. Additionally, there are higher upkeep costs and slower equity growth.
The final verdict for the pros and cons of a 15-year mortgage versus a 30-year mortgage depends on the buyer’s situation. Your choice will fall on how much you can afford per month, how long you plan on living in the home, and other plans in your life that could affect your ability to make the payments. If you can afford larger payments, then the 15-year mortgage could work. Otherwise, a 30-year mortgage might be a better option for you.
Buying a home takes time and patience, but that’s why we at GFA Federal Credit Union are here to help you. Our professional credit union mortgages lenders can help you find the appropriate mortgage loan option that’s just right for you. If you have any questions, please reach out to us today.