We are taking our first mortgage and trying to decide between a 15-year and a 30-year. What are the advantages of each?
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.
On the other hand, 30-year mortgages remain the most common choice for homeowners, capturing a significant share of the market. According to the National Association of Realtors, in 2020, approximately 63 percent of homebuyers opted for a 30-year mortgage.
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.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
