30-Year vs 15-Year Mortgage – Factors to Consider

Mortgage pic

Mortgage
Image: investopedia.com

Drawing on the guidance of company president David Gomez, Priority Mortgage Group serves clients as Priority Financial Group, based in San Dimas, California. There, Priority Mortgage Group offers a variety of mortgage products.

When choosing between a 30-year and a 15-year mortgage, a borrower needs to consider both monthly payments and the overall cost of the loan. In general, 15-year mortgages offer lower interest rates than 30-year products. And because of the way payment allocation works within a mortgage, more of a borrower’s monthly payment on a 15-year mortgage goes toward the principal.

This means that a 30-year borrower may end up accumulating more than twice as much interest as a comparable 15-year buyer, whose total amount paid will be significantly less in the end. However, because the15-year borrower has half as much time to pay off the loan, monthly payments are significantly higher.

Therefore, to decide between a 30-year and a 15-year loan, a borrower must determine whether he or she can afford higher monthly payments in exchange for a shorter payment period and overall savings. Those who cannot may need to choose a 30-year mortgage, though it may be possible in that case to make extra payments and reduce overall interest accumulation.

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