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Mortgages: 30 Year vs. 15 Year

Monday, August 8, 2016   /   by Teresa Dipeso

Mortgages: 30 Year vs. 15 Year

When deciding to buy a home, one of the most important steps you will take in financing is whether to go with a 30 year or a 15 year mortgage.  This decision can have huge and long last implications.  It's crucial to know which one is right for you and your future.

Advantages of 30 year terms:  While 15 year terms may cost a lot less in the long run, many people cannot afford that much steeper initial cost, and would rather spread it out over a longer period of time.  This is why approximately of 86% of mortgages are for 30 years.  Most loans don't penalize the borrower for paying it back early.  So, with the 30 year term, you will have the security and peace of mind knowing that your payments are significantly less than the 15 year, but you will also, usually, have the flexibility to repay the loan faster, and thus avoid some of the extra interest you would have avoided if you'd gone for 15 years.

Advantages of 15 year terms:  A shorter termed loan will certainly cost more now, but you will save a boat load in the long run.  You might be surprised just how much.  Let's use the example of a $300,000 home with a 20% down payment, a 30 year term at  today's average interest rate of 3.69%.  When all is said and done, this will cost you $456,708.  By contrast, a 15 year term at today's average rate of 2.69% will cost you $351,993.  So, a 15 year loan will save you over $100,000 in this scenario!  

There is no perfect loan term, it depends on your unique financial situation.  However, if you've got the cash, and you are confident you will have it in the future, there's little doubt that the 15 year term is the wisest course to take.  

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Teresa M DiPeso & The DiPeso Group Jersey Shore Real Estate Experts
Teresa M. DiPeso
Long & Foster
Avalon/Stone Harbor/Cape May/Sea Isle/Wildwoods, NJ 08202
609-780-1434

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The data relating to real estate for sale on this web site comes in part from the Broker Reciprocity program of the South Jersey Shore Regional MLS. Real estate listings held by brokerage are marked with the Broker Reciprocity logo or the Broker Reciprocity thumbnail logo (a little black house) and detailed information about them includes the name of the listing brokers.
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