A 15-year mortgage has some advantages compared to a 30-year mortgage, such as lower total interest paid, a lower interest rate, lower fees, and forced savings. If you already have a 30-year fixed-rate mortgage and are interested in refinancing a 15-year mortgage, there are a couple of key points to consider. While a 30-year mortgage can make your monthly payments more affordable, a 15-year mortgage generally costs less in the long run. Regardless of the type of mortgage you choose, you must also decide for how long you want to repay the loan, which is called the mortgage term.
For example, if you really want to apply for a 15-year mortgage, but your current income doesn't allow you to make higher payments, a mortgage lender might suggest that you save more money and find a higher-paying job so you can afford it. A 1% difference in the mortgage rate for a 30-year mortgage could save tens of thousands of dollars over the life of the loan. Despite having a lower rate, your monthly payments will almost always cost less with a 30-year mortgage than with a 15-year mortgage. The Bankrate mortgage calculator can help you calculate the monthly payments for a 30-year mortgage versus a 15-year mortgage, so you can have a clearer idea of how much you can afford to pay for a home.
based on your income. There is also the option to refinance from a 30-year mortgage to a 15-year mortgage in the future if your financial situation changes and you want to pay off your mortgage loan faster or lower your interest rate. Get Forbes Advisor ratings on the best mortgage lenders, tips on where to find the lowest mortgage or refinance rates, and other tips for buying and selling real estate. If you want to get a lower interest rate on your mortgage, also make sure you have a high credit score when you apply and consider one of the best mortgage lenders rated by Select, such as Rocket Mortgage and SoFi.
The 15-year mortgage tends to have a lower interest rate, although mortgage rates have generally been low for some time. The calculation of the reverse of the envelope is to what extent (or if) the return on foreign investment, minus the capital gains tax due, exceeds the mortgage interest rate after accounting for the mortgage interest deduction. However, monthly payments are higher in a 15-year mortgage because the principal pays off faster than in a 30-year mortgage. If you have enough money to make additional mortgage payments, Andrews says it's worth considering if you want to invest that money elsewhere that offers a higher return, rather than assuming that the investment involves relatively less risk, since paying the mortgage is often less risky than other initiatives.
As an alternative, a 30-year mortgage might be better for someone who has a more limited budget or wants to save money by paying less for their mortgage but for a longer period of time...
