What is the difference between a 15-year or a 30-year fixed mortgage?
A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. Though the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage. However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage so it still makes sense to use a 30-year mortgage for most people.
Who Should Consider a 15-Year Mortgage?
With a 15-year fixed rate mortgage, you can own more of your home faster. This is most popular among homebuyers with sufficient income to meet the higher monthly payments.
Advantages and Disadvantages of a 15-Year Mortgage
The 15-year fixed rate mortgage offers two big advantages for most borrowers:
- You own your home in half the time it would take with a traditional 30-year mortgage.
- You save more than half the amount of interest of a 30-year mortgage and lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.
The possible disadvantages associated with a 15-year fixed rate mortgage are:
- The monthly payments for this type of loan are roughly 10 – 15% percent higher per month than the payment for a 30-year.
- Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.
Compare them yourself
Use the "How much can I save with a 15-year mortgage?" calculator in our Resource Center to help decide which loan term is best for you.
