How to decide between a 15- and 30-year mortgage
If you’re reading this, chances are you’re thinking about purchasing a home, which is possibly the largest financial decision you’ll ever make. That’s why it’s important to know what to look for, and what will work best for you, your family, and your finances. When you apply for a home, you have options for your mortgage payments. You can choose a 15-year mortgage or a 30-year mortgage. Let’s break them down.
The 15-Year Mortgage
A 15-year mortgage means you will pay off your home entirely within 15 years. Your payments will be considerably higher because you’re paying off your home faster. Typically, 15-year mortgages have a fixed interest rate, which means the interest rate and payments will stay the same for the duration of the mortgage.
The 30-Year Mortgage
A 30-year mortgage means you will pay off your home fully within 30 years. The payments are more affordable than a 15-year mortgage, however, interest rates are typically higher.
Which Is Right For You?
A 15-year mortgage is an excellent option for borrowers who can afford a high payment. If having a debt-free retirement is something you look forward to, then the 15-year mortgage is a good option. If you’re considering the 15-year mortgage, be realistic with yourself and your finances. If times were tough, would you be able to afford the payments while paying other bills?
Having a 30-year mortgage will keep your payments low, which gives you more financial freedom. If you’re leaning towards a 30-year mortgage, make sure to factor in the interest costs you’ll have paid by the end of your mortgage, you could end up paying as much as $100,000 or more in interest after 30 years.