What to choose: 15-year or 30-year mortgage?

Mortgages come in different shapes and sizes, from low down payment options to large loans. In addition to the type of mortgage you choose, you also need to decide how long you plan to repay the loan, which is called the mortgage term. There are many kinds of mortgages to help you buy a home, but the most common ones are 15 year mortgage vs 30. You may need to stretch your mortgage up to 30 years if you want lower monthly payments. A 15-year mortgage can have higher monthly payments but shorten the term of the loan in half, reducing the interest you have to pay. To determine which type of mortgage is best for you and compare your total costs, fill in your entire home value, expected down payment, and interest rate in our Mortgage Calculator.

What are a 15-year and 30-year mortgage?

Let's explain the difference if you think about what to choose: 15 vs 30 year mortgage. When you get a standard 30-year mortgage, you pay a set amount of principal and interest each month, divided over 30 years, or until you sell the house and pay off the mortgage early. As with a 30-year mortgage, you will have a set monthly payment based on principal and interest divided by 15 years.

Features of 15-year and 30-year mortgages

Both 15 yr vs 30 yr mortgage can have fixed interest rates and fixed monthly payments for the life of the loan. However, a 15-year mortgage means that your home will be paid off in 15 years, not a 30-year mortgage, as long as you make the required minimum monthly payments.

15-year mortgages tend to have lower interest rates, although overall mortgage rates have been down for some time. However, monthly payments are more significant on a 15-year mortgage because you pay off the principal faster than on a 30-year mortgage.

Choosing between 15- or 30 year mortgage depends on your financial situation, including your credit score and history, down payment, and how much you spend on your monthly needs.

For example, a 15-year mortgage might be better if you have more monthly cash and want to pay off your house faster. Alternatively, a 30-year mortgage may be better for those with a tighter budget or who want to save money by paying less on their mortgage over a more extended period. A longer-term mortgage may also make more sense if you plan to live in the house for more than a decade.

The interest rate's size also influences how long you want to stretch your mortgage. For instance, if rates are low, it may make sense to lock in that low rate for extended periods and then use the extra monthly cash to invest in something else with higher returns, such as stocks or investment property purchases. Conversely, if interest rates are high, you may want to get a shorter-term mortgage so that you only pay that interest rate for 30 year vs 15 year mortgage.

There is also the option of refinancing from a 30-year mortgage to a 15-year mortgage if your budget changes and you want to pay off your mortgage faster or lower your interest rate.

Mortgage FAQs

How does 30 year or 15 year mortgage work?

A mortgage is a secured loan that utilizes the real property as collateral for the lender to provide you with financing. The lender will have a lien on your real estate until the mortgage is paid in full. Once closed, you will make monthly payments for 30 vs 15 year mortgage, covering principal, interest, taxes, and insurance. In case of non-payment of the mortgage loan, the bank will have the opportunity to foreclose on the property.

What are the types of mortgages?

There are different groups of mortgages:

These include conventional loans and large mortgages issued by private lenders but with more stringent requirements.

Potential homeowners can also access mortgages insured by the federal government, including the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the United States Department of Veterans Affairs (VA). The minimum requirements for these mortgages vary, but they are designed for low- and middle-income buyers.

Additionally to the type of mortgage, borrowers can choose how long they want to repay that mortgage, which is called the mortgage term. The most popular is 15 year vs 30 year mortgage, which means you have 15 or 30 years to pay off the loan.

How to apply for a mortgage?

Today, 30 yr vs 15 yr mortgage is available. To apply for a mortgage, analyze your credit profile and, if necessary, increase your credit score to qualify for the lowest interest rate.

Then calculate what home you can afford, including the down payment for a 15 or 30 year mortgage. When you're ready to apply, collect the required documents, such as proof of income and evidence of property, and start looking for the best rates.