15-Year vs. 30-Year Fixed Rate Mortgages
When choosing a fixed rate mortgage, you usually have the chance to choose the duration of the loan. You can choose the standard 30-year fixed rate mortgage or you can pay off your home loan faster with a 15-year fixed rate mortgage. The 30-year mortgage term has lower monthly payments, but you’ll end up paying more during the life of the loan.
The 15-year fixed rate mortgage term will have a slightly higher monthly payment, but you will usually pay a lower APR. The APR on a 15-year mortgage is about 0.05 to 1.0% lower than the 30-year mortgage.
You will also pay your loan off quicker with a 15-year mortgage, saving thousands of dollars in total interest charges.
Review this cost comparison for a mortgage loan of $100,000:
|
15-Year |
30-Year |
Interest Rate (APR) |
7.50 % |
8.00% |
Monthly Payment |
$927.01 |
$733.76 |
Number of Payments |
180 |
360 |
Total Money Spent |
$166,862 |
$246,149 |
Total Interest Paid |
$66,862 |
$164,149 |
The 15-year mortgage is used by many young home buyers who earn enough income to pay off their loan before their children start college. Their home equity builds up quicker and in a shorter time giving them additional equity to buy a car, pay for college or save for retirement.