30 Year vs 15 Year Mortgage Comparison

If you're planning on choosing a fixed-rate mortgage, it is definitely in your best interest to look into a 15 year term just in case it would be beneficial in your situation.

The 30 year term is by far the most common, and some people will even look into a 40 year mortgage, but nowadays the 15 year mortgage is gaining popularity. There are advantages and disadvantages of each so lets take a look at some.

30 Year Mortgage

Advantages	Disadvantages
Payments are lower since you have longer to pay off the loan. Since you have more money in savings because of the lower payments, you will be able to put that money into other investments or an interest bearing savings account. Since the 30 year mortgage has a higher interest rate, you will be able to deduct that much more on your taxes.	The total interest you will pay is much higher than a shorter term loan. Building equity in your home will be much slower, especially in the beginning since your payments during the early years are mostly going to the interest rather than the principal amount.

15 Year Mortgage

Advantages	Disadvantages
The mortgage rate is lower than a 30 year term. When we look at the numbers comparison, you will see that the total interest you will pay is dramatically lower than a 30 year term. You will build equity in the home much quicker since more of your payments go to the principal amount.	Your payments will be much higher each month. You may have to buy a smaller or an older home that could require more maintenance and repairs. You will have less money available to use for other investments, purchases, or to save in an interest bearing account.

Example

Now that we've covered the ups and downs of both sides, let's look at the actual figures.

In this example, we will take a $200,000 mortgage and find the total difference in the interest you would pay by the time you pay off the mortgage. We will not be adding in any extra property tax, mortgage insurance, or inflation figures.

Interest Cost Comparison

Term Length	Interest Rate	Monthly Payment	Interest Total
30 Year Term	6.0%	$1199	$231,676
15 Year Term	5.5%	$1634	$94,150
Difference			$137,526

Calculator

Here is a simple calculator that you can use to figure out the difference in payments between different term lengths.

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