Updated on 09.11.14

15 or 30 Year Mortgages: Which One Is Right For Me?

Trent Hamm

My wife and I are buying a home this summer and we’re pretty confident on what we’re going to buy based on the local marketplace: a pre-owned four bedroom house. We’ve looked at several in our price range and we’re getting set to make a move.

One major part in this decision is determining whether or not to get a fifteen or a thirty year mortgage. A fifteen year mortgage means larger monthly payments, but it also means a lower interest rate and far less interest paid overall. A thirty year mortgage means smaller payments each month, but a term that’s twice as long and a lot more interest paid over the life of the loan.

To decide which one was right for us, we asked ourselves a number of questions; these questions may be useful to you as well in determining what kind of mortgage you should apply for.

Are we going to be living in this home for a while? The longer we’re in the home, the more appealing the fifteen year mortgage is. If it looks like a move may be coming in the near term, a thirty year mortgage is better because it keeps our finances more liquid as we prepare to move.

What sort of payments can we afford? This is something of a trick question. For us, it’s not really a matter of how much we can squeeze out of our budget; instead, we have set a monthly amount that we feel comfortable paying. In short, if we aren’t comfortable with a fifteen year mortgage but will go for a thirty year mortgage solely based on the monthly payment we can afford, we’re borrowing too much. Even with the thirty year, we would be pushing our budget very hard, something we’re not comfortable with.

Are we comfortable living with what we can afford? Thankfully, we’re comfortable with the homes that are in our budget range in our area, but if we were not, we would stay put renting until we could afford what we’re comfortable with. We live in a situation where rent is substantially lower than our monthly payments will be (as do most people who rent), so we would stay where we’re at and keep saving for a while longer.

What are our plans in fifteen years (and longer)? We will have a high school aged son and another one who will be either in late junior high or high school. This is a point where we could move into a nicer home and still have time for the new house to feel like home to the children before they leave the nest. We eventually want to have a nice big home for family Christmases; my wife’s grandparents used to have them in their home until very recently, with lots of family coming in from out of town and filling up the bedrooms and the living room floor with cousins and uncles. We eventually want a home like this, and we both feel a fifteen year mortgage better reflects these values than a thirty year one.

In short, we’re choosing a fifteen year mortgage because we can afford it on a monthly basis and because it fits in with our overall goals (family and thriftiness). If you’re trying to decide which one is right for you, ask yourself these questions and see what the answers reveal to you.

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  1. Nathan says:

    Seems like there is a lot more to consider here, you obviously have the additional money to pay for the 15 year mortgage, and are disciplined enough to not “buy up” by using various mortgage techniques. Have you not considered taking out a 30 year mortgage, investing the difference aiming not for super aggressive returns but more moderate index average returns of 8-10%? At the end of the 15 year mark you would easily be able to buy out the rest of your mortgage. Obviously the amounts depend greatly on your particular interest rates, home purchase price, etc, but the more expensive the house, the more potential for gain by taking the 30 year mortgage, even if you end up buying out the contract.

    There are also many other advantages: the liquidity of your assets, the lower payments should anything catastrophic happen, the fact that more interest can be claimed on tax returns, etc. I’m just wondering how you considered these options when you ran the numbers to decide that the 15 year was ideal for your situation.

  2. samerwriter says:

    Our mortgage is (and was) _well_ within our means to afford, but we went with a 30-year anyway. Our reasoning was:

    1) In a worst case, if we did wind up in a cash crunch, the 30-year mortgage gives us more flexbility.

    2) We planned to retire our mortgage in well under 10 years, so the interest savings from the 15-year mortgage would be minimal.

    3) At the time, we got out 30-year for 5.75%. A 15-year was maybe 1/8 point less. It just wasn’t enough of a discount that it made a difference.

  3. efipo.com says:

    The longer the mortgage better it is. Almost every single real estate guru (the ones that actually own property) say they would love to have a 100 year mortgage. Smaller payments and longer pay period can leverage your investment big time. The biggest reason being the fact that you are paying with inflated money over time and the extra amount you can invest at a higher rate of return than the interest you are paying in the mortgage long term.

  4. jake says:

    To each his own.

    If you do plan to move in the very short term, it makes no difference how long your mortgage is. If you plan to own it and have no intention of moving, a mortgage that is too long doesn’t make sense.

    I am not sure about everyone else but I want to own my home. People talk about a house almost entirely like an investment, while this might be popular there are many who see it actually as what it is a home. A dream that is realized, not “i want to make a profit” with dollar sign eyes. Not everyone buys a home with the intention of selling.

    I want to own the home and actually want to have the sense of feeling that it belongs to me, not some lender, not some creditor.

    Me personally, if I have the money I’d pay off the house on the spot.

    efipo, there is a reason these “gurus” you refer to want these long mortgages, they are in it to dump the house as soon as possible, what difference does it make the term of the mortgage. What about the rest of the people? Does it benefit everyone else to hold on to a house that long. I am sorry but a 100 year mortgage does not seem practical.

    Then again, to each his own.

  5. Todd says:

    We could be paying a lot more toward other debt if we had a 30-year instead of a 15, but as it is we’ll have the house paid off by the time our 6-month-old is in second grade. If it had been a 30, we’d be paying until he was through college.

    (For our debt, the interest is about the same either way.)

  6. Ursula says:

    I think the 15-year mortgage is a better choice — I’m glad that’s the one you’re going with! Psychologically it’s a great loan because you can actually see the light at the end of the tunnel. When I first purchased my house in 2000, I got a 30-year mortgage because that’s all I could afford. Two years later after the house appreciated a bit in value, I refinanced it to get rid of the PMI and to get a lower interest rate. I got a 20-year loan when I refi’ed in 2002, and now I have only 15 years left to go which I find to be a great feeling. 15 years doesn’t seem like too far away, whereas if I had 30 more years to go I would just feel like I was digging away at a mountain with a teaspoon.

    The extremely lower amount of interest payments is a huge reason for going with a 15-year, but so is (IMO) the psychological benefits of being able to see on the horizon that wonderful day when you own your house outright!

    Good luck to you and your family on this exciting next stage of your life! I look forward to reading about it in your blog.

  7. Nathan says:

    Jake, I’m not sure why you assume that everyone just wants to dump their house after a short term. Everything I brought up initially makes no difference if you are in it to sell or to keep. In fact, keeping is the premise I had in mind when writing it. What it comes down to is where you want your money. You obviously want yours tied up in your home equity, many others don’t. Especially if you’re looking to own it, as you say, as a house and not investment, your locked up equity does nothing for you. Instead, I’d rather have my money liquid and working for me. Even if I intend to keep the house, my money is making more, so that if in 15 years I want to buy the mortgage outright, I’ll still end up ahead. We both realize our dream, we both own houses at the end of 15 years. Why wouldn’t you want to maximize the effectiveness of your own money if you had the choice?

  8. TiP says:

    If the 15 year doesn’t cause any cash-flow pain, then I’d go with it. However, if the difference between being able to make a 15 year work vs a 30 year means that you have to qualify based on both spouses salaries (sounds like that’s not the case for you) then go with the 30 and pay a little extra on the principal each month.

    Also, I think you’re in the midwest, so you’re probably OK buying this summer, but the coasts will likely see more price depreciation for another year or so. Prices went up so fast in many areas that they completely lost any meaningful corrolation with incomes. And then there’s the subprime mortgage implosion which will keep lots of first time buyers out of the market due to the new qualification standards which have become much tighter in the last 2 months.

    but if you’re putting 20% on a fixed interest loan and your FICO is over 700 you should be able to get a loan…. FICOs under 700 may have a tough time.

  9. Paula says:

    Why not get the 30 year and make extra principal payments? You can pay it off early, (check to see there is no penalty for doing so), and if you have problems at some future time with finances, you have a little wiggle room.

  10. maxconfus says:

    Get a 30 year mortgage. Make over payments if it fits your budget. The inflation of the dollar combined with increase in real estate will give your best gains for the long, imo. Not to mention if you have an emergency you are not saddled with the high mortgage paymeny.

  11. jake says:


    My comment was directed at efipo.com, because to tell people that “The longer the mortgage better it is,” is misleading in many ways. Also because efipo.com’s comments make it seem as though everyone is in the real estate business. Which is where the comment about every house being an investment, came in.

    It is also why I said to each his own. I dont want the investment if I can pay my house off as soon as I can. It just depends on how you see the picture.

  12. Becca says:

    I recently read this article and thought it did a good job of comparing 15 and 30 year mortgages, and I agree with it that 15 year is better.


  13. Mike says:

    samerwriter -is dead on. get a 30 year fixed w/ no penalty for prepay. It gives you the flexibility to pay off early, use as a n interest tax deduction or pay off early. As SW pointed out, there is very little difference between the interest of a 15 or 30 yr loan, so get the safety of a 30 and pay off early or wait as the need arises.

  14. Dave says:

    Why not get a 30 yr. loan and pay it off in 10 yrs. using leveraged principle reduction. This is based on the Australian “One Account” loan where your mortgage is transactional, meaning you can run your monthly cash flow through this mortgage account. When your income flows into the account, it reduces the interest due making more of your normal payment work against the principle. Any surplus or unspent income at the end of the month further reduces the principle but can still be accessed if you need to. This process can take a 30 yr. mortgage down to 10 years or less without locking you into the higher 15 yr. payment.

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