15- vs. 30-year Mortgages: How to Decide Which is Best for You

August 25, 2021



Most homebuyers choose either a 15-year mortgage or a 30-year one.

In both cases, the interest rate is fixed — meaning it’s consistent for the entire loan term. Aside from this, though, that’s about where the similarities end. The payment size, payoff timeline, pros, and cons all vary widely, and the right choice really depends on your unique situation as a buyer (or homeowner, in the case of refinancing).

Are you about to buy a home or refinance your existing mortgage? Not sure if a 15- or 30-year loan is best? Ask yourself these three questions.

1. What’s more important: Long-run savings or savings on your monthly payment?

A 30-year mortgage will always have a lower monthly payment than a 15-year one, but it comes with significantly higher interest costs in the long run. While that extra cost may be worth it for some families — especially if it lets you buy your dream home sooner, for others, it might be a harder pill to swallow.

It’s all a matter of preference and budget: Do you need those monthly savings now due to income restraints or other costs you may be dealing with? Or can you afford a higher payment to save thousands in the long haul? Look at your financial situation and figure out what works best for your household.

2. What’s your appetite for risk?

If you hit on hard times or lose your job, the higher payment on a 15-year loan may be hard to cover. This could put you at higher risk for foreclosure — not to mention losing your home.

A 30-year loan gives you a bit more flexibility. If your income decreases or you face sudden expenses elsewhere, the payment on a 30-year loan allows you to more easily handle those challenges, while still making your monthly housing payment.

Which would you prefer? You’ll want to think about the stability of your employment, your income level, and the emergency savings you have on hand when determining this.

3. What are your other financial goals?

You should also consider your other financial goals as a household. If you want to funnel more away for retirement, buy investments, or just save up for a good vacation, a 30-year mortgage will free up the most cash (at least on a monthly basis) to do it with.

The higher payments of a 15-year loan, on the other hand, can make it harder to save and invest — especially if you’re on a limited income. You’ll want to sit down and think about your financial goals (both short- and long-term) before deciding which type of loan to go with.

The bottom line

Both 15-year and 30-year mortgages have their benefits, but the best choice depends on your budget, your goals as a household, and the risks you’re willing to take with your finances. Need help determining which option is right for your family? Get in touch with Premier Nationwide Lending today.

Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.

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