Compare Terms of 15 & 30 Year Fixed Rate Mortgages
This calculator makes it easy to compare the monthly payments for any 2 fixed-rate mortgages (FRMs). Due to historically low interest rates FRMs are currently far more popular than adjustable-rate loans. If you would like to compare FRMs, ARMs & interest-only loans you can use this calculator.
Advantages of 30-Year Home Loans
The big advantage of a 30-year home loan over a 15-year loan is a lower monthly payment. This lower payment in turn makes it easier for home buyers to qualify for a larger loan amount.If the homeowner has other investments which offer superior returns to real estate then they can invest the monthly difference into those higher yielding investments.Homeowners can also deduct mortgage interest expense from their income taxes on the first $750,000 of mortgage debt. Slowly paying down mortgage debt while accumulating assets in a tax-advantaged retirement account can help people compound wealth quicker.
Provided one has a stable job & a stable source of income, financing their home using a 30-year loan offers great flexibility. If interest rates rise, the monthly loan payments do not change. If interest rates fall, the home buyer can refinance into a lower rate and/or a shorter duration loan. And if an owner comes into some money through a work bonus, an inheritance or another winfall they can apply any extra cash to pay down their loan quicker.
Advantages of 15-Year Home Loans
For those who can afford the slightly higher payment associated with a 15-year mortgage are getting a better deal in almost every possible way. Here are some of the advantages of a 15-year mortgage over a 30-year mortgage:
- Lower interest rates: While both loan types have similar interest rate profiles, the 15-year loan typically offers a lower rate to the 30-year loan. The spreads change over time, but the 15-year is typically about a half a percent lower than the 30-year.
- Build home equity much faster: Historically American homeowners typically move homes or refinance about every 5 to 7 years. After the Great Recession this window moved out to about 10 years. If a person stretches their loan payments out to 30-years they build limited equity in their home in the early portion of their loan. A person who pays off a home in half the time is not making a payment which is twice as large.