15 vs. 30 Year Mortgage: Which is Better?

Most people opt for three-decade plans because they cannot afford higher monthly payments. But this costs them thousands in interest.

You may have finally saved enough money for a new home’s down payment. However, you are probably unsure about the best mortgage plan you can afford. Before you choose either one, you should understand the main differences.


Although the structures are mostly similar, 15-year plans are cheaper than 30-year plans. Most people opt for three-decade plans because they cannot afford higher monthly payments. But this costs them thousands in interest, which could be avoided.


Let’s explore the differences between each mortgage type to decide which is objectively better.


15 vs 30-Year Mortgage–Which Is Better?

15-year mortgage plans require you to pay higher monthly payments. Many people cannot afford these payments, so they choose a longer term. However, a 30-year mortgage plan means you will pay more in interest.


Initially, the 15-year term seems more expensive, which is why homeowners choose the 30-year plan. They simply cannot afford to pay an extra few hundred dollars each month. But if they do their calculations properly, they can make more sacrifices initially to pay off the loan faster.


Objectively, the 15-year mortgage term is a better option because you need to pay less money. Realistically, however, most people cannot afford to make such high payments each month, so it is out of the question. This means they have no other option but to opt for a longer term, even if they end up paying more in interest.


15-Year Mortgage Plan

The interest on a 15-year mortgage is between 0.25 to 1% less than a 30-year plan. If homeowners can make sacrifices to afford this plan, that would be most optimal. Additionally, this plan is most suitable if you wish to avoid extra fees dependent on credit scores and small down payments.


If you are close to retirement, it makes sense to opt for this mortgage plan. Its loan repayment terms are the best option to avoid paying a mortgage during your retirement years. This is because you are on a fixed income from your savings, which is directed towards other essentials.


30-Year Mortgage Plan

A 30-year mortgage plan means it will take much longer to pay back your loan. You can also expect to pay thousands of extra dollars at the end of your term. Interest rates are typically at 4%, which is much higher than the 15-year term.


However, a longer term is advantageous because it allows homeowners to make smaller monthly payments. This means they do not have to worry about paying their loan quickly and can afford other things while paying back their loan. Also, homeowners can increase their savings if they don’t need to pay more towards their monthly mortgage, which is compelling.


Final Verdict

15-and 30-year mortgage plans have their pros and cons. However, a 15-year plan costs less and saves a significant amount on interest. Despite this, most people have no option but to opt for the longer plan since they cannot afford big monthly payments.

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