Combined with the long repayment period, interest rate charges are higher on a 30-year mortgage than on a 15-year mortgage. This means that you'll end up paying more over the life of the loan than you would for a 15-year mortgage with the same interest rate. Monthly payments on a 15-year mortgage are higher than those on a 30-year mortgage and are often significantly higher. A 30-year mortgage allows the borrower to extend payments over an extended period and keep more of your monthly income.
A 30-year mortgage has a higher interest rate than a 15-year mortgage, and you'll pay more interest than principal payments on a 30-year mortgage. An alternative to a 30-year fixed mortgage is a 15-year fixed-rate mortgage. People with a 15-year term pay more per month than those with a 30-year term. In return, they receive a lower interest rate and will repay your loan faster.
Borrowers with a 15-year term repay their debt in half the time and potentially save thousands of dollars over the life of their mortgage. On the other hand, a 15-year mortgage has higher monthly payments. However, because the interest rate on a 15-year mortgage is lower and you amortize the principal more quickly, you'll pay much less interest over the life of the loan. Plus, you'll pay off your house twice as fast.
There are many different types of mortgages available to help you buy a home, but the most common ones tend to last 15 or 30 years. If you want lower monthly payments, you may need to extend your mortgage loan to 30 years. A 15-year mortgage may have higher monthly payments, but it cuts the length of the loan in half, which also reduces the amount of interest you pay. The average interest rate for a 30-year mortgage has been between 0.5 and 1% higher than that of a 15-year mortgage for the past few years years.
Regardless of the type of mortgage you choose, you must also decide how long you want to repay the loan, which is called the mortgage term. 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. 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. A mortgage calculator can show you the impact of different rates on your monthly payment, as well as the difference between a 15 and 30 year mortgage.
However, monthly payments are higher on a 15-year mortgage because you pay off the principal faster than on a 30-year mortgage. Refinancing to change the term of the mortgage can affect your finances, whether you're thinking of reducing the duration of the loan from 30 to 15 years or extending it in the opposite direction. As an alternative, a 30-year mortgage might be better for someone who has a tighter budget or wants to save money by paying less for their mortgage, but for a longer period of time. You can make the right mortgage decision if you choose a 15-year fixed-rate mortgage from the start.
Talk to the mortgage loan specialists at Churchill Mortgage, from RamseyTrusted, to get a 15-year mortgage that fits your budget so you can pay off your home quickly. While a 30-year mortgage can make your monthly payments more affordable, a 15-year mortgage usually costs less in the long run. However, a 15-year mortgage means that you'll pay off your house in 15 years, instead of paying the entire 30-year mortgage, as long as you make the minimum monthly payments required. The 15-year mortgage tends to have a lower interest rate, although mortgage rates have generally been low for some time.
A percentage point may not seem like a big difference, but keep in mind that a 30-year mortgage makes you pay that difference twice as long as compared to a 15-year mortgage.
