15-year and 30-year mortgage - Pros and Cons

Deciding on a mortgage term is one of the important factors for the home buyers. While talking of mortgage, we generally think of the interest rates alone. But the mortgage term is something more basic that you need to consider, which usually come with two options: 15-year or 30-year mortgage.

15-Year Mortgage

In a 15-year mortgage term you have to pay less interest rates as compared to 30-year loan. Even though the monthly mortgage payments are higher, but still people prefer as it allows them to build home equity quickly because of shorter amortization. Another reason for the popularity of this type of mortgage loan is that everybody wants to clear debt as quickly as possible.

Pros:

Less interest

Loan cleared faster

Cheaper mortgage insurance

Cons:

Higher mortgage payment

Less chance of benefiting from other investment

30-year Mortgage

The 30-year mortgage has the advantage of lower monthly payments due to which it has been a choice for many homeowners in the past. The fluctuation in the interest rate does affect you monthly payment in the entire time period.

Pros:

lower mortgage payments

Capital repayment

Better than renting

Cons:

More interest paid

Negative equity

Less flexibility

Choosing the length of the mortgage term is totally up to you. Here I have just jotted down the pros and cons of both the terms that can help you choose the best option for you.