The pros and cons of a 15 year mortgage
Mortgages over 15 years versus 30 years
30 year mortgages
A 30-year fixed rate mortgage is the most popular type of home loan in America because the long repayment period results in significantly lower monthly payments. A lower mortgage payment could help you save for other goals, such as home renovations or retirement. However, with a 30-year fixed rate mortgage, you will pay a higher interest rate than a shorter term mortgage.
For example, with a $200,000 30-year mortgage with a fixed rate of 3.5% (roughly the average 30-year rate at the start of 2022), your monthly payment would be $898 and you would pay 123,311 $ in interest at the end of your loan term.
15 year mortgages
A 15-year fixed rate mortgage works a lot like a 30-year fixed rate. However, since you’re paying off the loan faster, you’ll increase your home’s equity faster and you’ll likely qualify for a lower rate. The downside to a 15-year mortgage is that the payments will be much higher and you may have less leeway to save and make other investments.
If you had a $200,000 15-year mortgage with a fixed rate of 3% (roughly the average 15-year rate at the start of 2022), you would pay $1,381 per month and a total of $48,609 interest over the term of your loan.