Which Mortgage is Better? 15 vs 30 Year Home Loan Comparison Calculator (2024)

FAQs

Which Mortgage is Better? 15 vs 30 Year Home Loan Comparison Calculator? ›

Generally, a 15-year mortgage means higher monthly payments. This means you'll be able to pay the loan off faster and pay less interest over the life of the loan. A 30-year mortgage generally offers lower monthly payments. With this option, the total amount you pay over the life of the loan will usually be higher.

A 15-year mortgage means larger monthly payments, but a lower rate and substantial savings on interest. A 30-year mortgage gives you a more affordable monthly payment, but expect higher borrowing costs overall. You can also take out an interest-only mortgage or pay your loan off early to maximize interest savings.

The national average 15-year fixed refinance interest rate is 6.68%, down compared to last week's rate of 6.80%. The average rate on a 15-year mortgage is lower than the rate on the more popular 30-year loan, which currently hovers at 7 percent.

It's half the length of a 30-year mortgage, which means the lender will receive the entirety of the amount they loaned you in half the time. This quicker payback is generally less risky for lenders and comes with less inflation, so they typically offer a lower interest rate on 15-year mortgages.

In the mortgage world, it's common to find that 15-year mortgages often come with lower interest rates than 30-year mortgages. This is because lenders typically view shorter-term loans as less risky since they'll be paid back more quickly. Consequently, they may offer a more favorable rate.

Lenders charge a lower interest rate for 15-year loans because it's easier to make predictions about repayment over a 15-year horizon than it is over a 30-year horizon. Another reason for the savings? Home buyers are borrowing the money for half the time, which dramatically reduces the cost of borrowing.

To O'Leary, debt is the enemy of any financial plan — even the so-called “good debt” of a mortgage. According to him, your best chance for long-term financial success lies in getting out from under your mortgage by age 45.

As far as the simple math goes, a $200,000 home loan at a 7% interest rate on a 30-year term will give you a $1,330.60 monthly payment. That $200K monthly mortgage payment includes the principal and interest.

If, rather than going for a 25-year term, you choose a 30-year mortgage then your monthly payments will be reduced, giving you more cash to spend on things that are important to you. If you've struggled to get enough capital together for a deposit, a longer mortgage term makes owning a house more affordable today.

What is the interest rate on a 15 year mortgage right now? ›

Thirty-year fixed-rate mortgages dominated, accounting for almost 90 percent of the home-purchase loan market. Fast forward to today—the 30-year fully amortizing fixed-rate mortgage is averaging just above 4 percent through March and is still by far the most popular mortgage product for America's homebuyers.

With their changing interest rates, adjustable-rate mortgages (ARMs) are a particularly risky choice for borrowers with less-than-ideal financial situations. In fact, some fixed-rate mortgages can also be problematic under the wrong circ*mstances.

Since mortgage interest is an itemized deduction, you'll use Schedule A (Form 1040), an itemized tax form, and the standard 1040 form. Schedule A lists other deductions, including medical and dental expenses, taxes you paid and donations to charity.

The Bottom Line

If your aim is to pay off the mortgage sooner and you can afford higher monthly payments, a 15-year loan might be a better choice. The lower monthly payment of a 30-year loan, on the other hand, may allow you to buy more house or free up funds for other financial goals.

You'll have more flexibility: When you choose a 30-year loan, you don't lock yourself into a larger monthly payment. Instead, you have the flexibility to make extra payments when you can afford it, whether that's every month or once a year.

2 year fixes usually have the lowest interest rates and smallest monthly repayments, compared to longer-term fixed mortgages. This means you can save money in the short term and have more disposable income. 2 year fixes allow you to switch to a lower deal sooner if interest rates fall or your circ*mstances change.