Is a 15-year Mortgage a Good Idea?

Posted by Bill Ryan on Thursday, October 31st, 2019 at 8:32am.

Is a 15-year Mortgage a Good Idea?

10/31/2019

If you consider the current difference in a 15-year loan is approximately ½% lower, then, yes, it may a good idea.  But, if you can't afford the higher payment amortized over half the time of a 30-year, then, no, it may not be a good idea.

It may be good for some people based on their ability to make a higher payment if one of their goals is to build equity in their home faster or to pay it off sooner.

The term of the mortgage is a long-term commitment.  You are agreeing to make the specified payment each and every month.  If funds are tight one month, they don't allow you to make the 30-year payment one month and go back to the 15-year payment the following month.

An alternative to getting a 15-year loan, would be to get the 30-year loan and make the payments as if it were a 15-year mortgage.  You won't benefit from the lower interest rate available to shorter term mortgages, but the principal will reduce to match the shorter term.

$300,000 Mortgage

30 years

15 years

Interest Rate

3.64%

3.16%

Mortgage Payment

$1,370.69

$2,094.91

Unpaid balance at end of 10 years

$233,436

$116,127

Additional Monthly Payment

 

$724.22

Additional Total Payments

 

$86,906

Savings

 

$30,403

 

To see what it would be for your situation, use the 30yr vs. 15yr Comparison.

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