If you consider the current difference in a 15-year loan is approximately ½% lower, then, yes, it may a good idea. But, if you can’t afford the higher payment amortized over half the time of a 30-year, then, no, it may not be a good idea.
It may be good for some people based on their ability to make a higher payment if one of their goals is to build equity in their home faster or to pay it off sooner.
The term of the mortgage is a long-term commitment. You are agreeing to make the specified payment each and every month. If funds are tight one month, they don’t allow you to make the 30-year payment one month and go back to the 15-year payment the following month.
An alternative to getting a 15-year loan, would be to get the 30-year loan and make the payments as if it were a 15-year mortgage. You won’t benefit from the lower interest rate available to shorter term mortgages, but the principal will reduce to match the shorter term.
|
$300,000 Mortgage |
30 years |
15 years |
|
Interest Rate |
3.64% |
3.16% |
|
Mortgage Payment |
$1,370.69 |
$2,094.91 |
|
Unpaid balance at end of 10 years |
$233,436 |
$116,127 |
|
Additional Monthly Payment |
|
$724.22 |
|
Additional Total Payments |
|
$86,906 |
|
Savings |
|
$30,403 |
To see what it would be for your situation, use the 30yr vs. 15yr Comparison.
