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What Are The Advantages Of 15 Year/30 Year Mortgage Loan Terms?

By Bob Redtree

What are the advantages of 15 year/30 year mortgage loan terms?  Read here to know the pros and cons of a 15 year and 30 year mortgage!

For many potential homeowners, one of the most confusing aspects of purchasing a home is deciding which mortgage to select.  Most people choose either a 15 year mortgage or a 30 year mortgage.  Following is a discussion of advantages of 15 year/30 year mortgage loan terms.

Monthly Payment

The first factor that needs to be needs to be considered when considering the advantages of 15 year and 30 year mortgage loan terms is monthly payment.  A 30 year mortgage always has cheaper monthly payments than a 15 year mortgage.  For example, a $200,000 mortgage with a 6% interest rate will have a monthly payment of $1,688 for a 15 year mortgage.  A 30 year mortgage payment would be $1,199.

Repayment Time / Overall Cost

Another factor that needs to be needs to be considered when considering the advantages of 15 year and 30 year mortgage loan terms is the repayment time.  While a 30 year mortgage may provide cheaper payments each month, it takes twice as long to repay than a 15 year mortgage.  Over time, a 30 year mortgage is much more expensive.  For a $200,000 mortgage at 6% interest, total interest paid on a 30 year mortgage is $231k.  A 15 year mortgage will have total interest of $104k.

Interest Rate

The last factor that needs to be needs to be considered when considering the advantages of 15 year and 30 year mortgage loan terms is the interest rate.  Normally, a traditional lender offers a lower interest rate on a 15 year mortgage than on a 30 year mortgage.  This is because the borrower will be paying back the loan quicker, which minimizes overall risk to the lender.

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5. Is a 50 Year Fixed Mortgage Really a Good Idea?