January 25, 2021

15-year or 30-year loans?

When it comes time to select a mortgage, you have many different options.

One of the most basic options to decide on is a 15-year fixed rate loan compared to a 30-year fixed rate loan.

There's a lot of news that says you should always be considering a 15-year fixed because there's certain advantages to it:

  • You're going to pay it off earlier, in half the time compared to a 30-year loan
  • You're going to have a lot less interest to pay over the life of the loan because you're paying it off over a shorter time period

Your monthly payment, though, will be higher than a 30-year fixed monthly payment, and that's because you're paying off the same amount of debt over a shorter period of time. So, as long as you have the cash flow, and can manage that payment, and you know that the cash flow is going to be consistent for you for that entire 15-year period, it's a great selection.

There may, however, be times where that higher payment could be a little tough to make.

One suggestion would be to consider taking a 30-year fixed rate mortgage, then making a payment that would be similar to a 15-year fixed mortgage. When you do that, you're going to pay it off in about the same time frame as a 15-year fixed mortgage, but now you have some cash flow flexibility. In some months, if things get a little tight, you can fall back and just make the regular 30-year fixed payment and not make the additional principal payments. So, with a 30-year fixed mortgage you've got some choices when it comes to making your monthly payment.

Make sure you select carefully between a 15-year fixed and a 30-year fixed. Both are great options, and we can help you make an informed decision. If you have any questions, just reach out to us and let us know.

Watch our video on this topic here.