The choice between a 15-year mortgage and a 30-year mortgage has long been a subject of discussion, but the decision usually comes down to money and lifestyle.
One of the primary advantages of a 15-year mortgage is the significant savings in interest payments over the life of the loan. With a shorter term, borrowers can secure lower interest rates, resulting in substantial interest savings compared to a 30-year mortgage. Homeowners can build equity at a faster rate, often freeing up finances for other goals such as retirement savings, college funds, or investments.
But payments are usually the issue. On a $200,000 house, the monthly payment can be more than $400 higher on a 15-year mortgage compared to a 30. The lower monthly payments of a 30-year mortgage has a lot of appeal.
According to data from the Mortgage Bankers Association, in 2020, around 35 percent of homeowners opted for a 15-year mortgage. This marked a steady increase over several years, suggesting a growing appreciation for the benefits of shorter mortgage terms among borrowers.
Whether you decide on a 15-year or 30-year mortgage, the key issue is to buy the house you can afford. During your life as a homeowner, you may change locations or need a larger house for your family. So you will need to have a payment on a house you can afford, while maintaining the house so that it retains value.