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15 Year vs 30 Year Fixed Rate Mortgages

Which one is right for you? Let’s Find Out.

15 vs. 30 year fixed
One of the big decisions of buying a home: 15 vs. 30 years.

Lower Interest Rate & Higher Payments or Lower Payments & Higher Interest Rate

One important decision homebuyers face is whether to secure a 30-year, fixed-rate mortgage or go for a 15-year one, which carries a lower interest rate. “All things equal, a 15-year mortgage allows you to pay off your mortgage twice as fast while saving a significant chunk of money on interest,” explains Mark Crosby, a mortgage expert in Wilmington, Del. Still, “I think the 30-year mortgage is a logical choice for most people because it has more advantages.”

Which payments won’t break your bank?


For starters, mortgage payments are less expensive with a 30-year mortgage, enabling more consumers to qualify for home purchases. “With a 30-year mortgage you are almost always free to make additional principal payments necessary to pay off your loan [faster] without penalty,” Crosby says. “With the 15-year loan, you are committed to giving that extra money to your lender each month, whether you can really afford to at the time or not.”

With a 30-year you'll pay more in interest, but it will allow you invest elsewhere.
With a 30-year you’ll pay more in interest, but it will allow you invest elsewhere.

Diversifying Your Investments

Higher payments that come with a 15-year mortgage make little sense if they keep you from building savings or contributing to a 401(k) plan, IRA or a college fund, adds Dan Green, a loan officer with Waterstone Mortgage in Laurel, Md. “You could be needlessly tying up too much of your money into your house.”

Tax breaks always make filling out your taxes easier.
Tax breaks always make filling out your taxes easier.

Tax Benefits

Green said another reason people favor a 30-year fixed mortgage is the tax benefit. “This is because theamortization schedule of 30-year fixed is back-heavy, with early-term payments big on interest and light in principal,” he explains. “By contrast, the 15-year fixed is always light on interest which lowers its taxpayer benefits.”

When buying a house, taxes are NOT the only factor to consider.
When buying a house, taxes are NOT the only factor to consider.

Interest vs Tax Breaks

While it’s true you gain more of a tax break from a 30-year loan, it shouldn’t be the main consideration when deciding on a term. The 30-year borrower pays less in yearly taxes because he or she pays significantly more in interest.

Just remember through all the stress/decision making, you're buying a home and that's something to celebrate!
Just remember through all the stress/decision making, you’re buying a home and that’s something to celebrate!

The Final Word

So it all comes down to choice and circumstances. Choose the 15-year loan if you have the financial wherewithal to assume the payments. Your interest savings will be substantial and you’ll own your home faster. Opt for the 30-year loan for lower payments and greater flexibility. You can always choose to pay more on your mortgage when the money is available.

We cover Chelsea Homes, Dexter Homes, Ypsilanti Homes, Saline Homes, Ann Arbor homes and the entire Washtenaw County area.

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For additional information, please call us at 734-747-7500 or 734-747-7700 weekdays, or 734-660-0105 evenings and weekends. You can also email us at or online at anytime.

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