The Financial Benefits of a 15-Year Mortgage
If your budget allows for higher monthly payments, opting for a 15-year mortgage can be one of the best financial decisions you make. It allows you to build equity twice as fast and pay off your home in half the time while saving a massive amount of money in interest costs.
Lower Interest Rates and Faster Payoffs
Lenders typically offer lower interest rates on 15-year loans because they represent less risk. For example, a 15-year rate might be 0.5% to 1% lower than a 30-year rate. Combined with the shorter term, this saves you hundreds of thousands of dollars. On a $350,000 loan, a 15-year mortgage at 5.8% results in approximately $176,000 in total interest, compared to $446,000 for a 30-year loan at 6.5%—a saving of $270,000!
Is a 15-Year Mortgage Right for You?
The main drawback is the higher monthly payment, which reduces your monthly cash flow flexibility. If you lose your job or experience an emergency, these higher payments can become stressful. Use our 15-Year Mortgage Calculator above to model your monthly budget and verify if this financing strategy is right for you.