15 year vs 30 year mortgage: How to Compare the Tradeoffs
A 15-year mortgage can reduce the time a loan remains outstanding and may reduce total interest. A 30-year mortgage usually has a lower required monthly payment and can leave more room in the household budget. The better term is the one that fits both the purchase and the rest of your financial life. The monthly-payment tradeoff A shorter term generally requires a larger monthly principal-and-interest payment because the balance is repaid over fewer months. A longer term spreads repayment across more months. Taxes, insurance, HOA dues, and mortgage insurance can be added to either option, so compare the full housing payment rather than the principal-and-interest line alone. A high required payment can be a problem even when the total interest looks attractive. Before selecting a shorter term, test whether the payment still leaves room for emergency savings, retirement contributions, maintenance, and other debts. The total-interest tradeoff Interest is calculated from the outstanding ba...