15 Year vs. 30 Year Mortgage

Buying a home is one of the biggest life decisions you will ever make. Equally as important is the mortgage you select when making the purchase. There are many options available to potential buyers, including FHA, VA, Balloon, Conventional, USDA, and many more.

Determining the length of term you are able to pay, however, will perhaps have the biggest impact on your bottom line long-term. The most common mortgages feature either 15 or 30-year terms.

The 30-year fixed mortgage is usually the most popular option buyers choose. It offers the most flexibility and is usually the most affordable, freeing up finances for other important purchases such as a car, college savings, or retirement contributions, to name a few.

The 15-year fixed mortgage will save you the most in the long run, but will cost you more each month in terms of out-of-pocket expense. In other words, it makes the most financial sense only if you are able to afford the monthly payment.

Both types of loans are structured much the same way, but there are some key differences. First and foremost is the length of time to repay:

  • The 15-year loan takes half the time to pay as the 30. In addition, a much larger percentage of your payment goes towards principal, since most 15-year loans have a lower interest rate.
  • On the other hand, the 30-year loan makes paying off the mortgage much more comfortable due to a lower fixed payment each month. But you will pay a much larger interest payment over the term of the loan as a result, making it a classic short-term vs. long-term trade off.

So in summary, there are benefits to both types of mortgage loans. It is always best to pay off your mortgage as quickly as you can, as with any debt you incur. However, it is important to balance the ideal with the realistic, and for many, a 30-year loan offers that perfect balance to live in the house they want while maintain a lifestyle that is comfortable over the long term.


About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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