Here are the pros and cons of 15-year vs. 30-year mortgage terms.
Sometimes buyers are unsure whether they should look at a 15-year mortgage term, or maybe a 30-year term. Today we’ll take a quick look at how the numbers breakdown over the life of the loans.
For this example, we’re using a $250,000 home with a $50,000 down payment. This gives us a $200,000 loan amount.
On the 15-year loan, you’ll have a low interest rate of 2.5%. This gives you a monthly payment of $1,334. On the 15-year loan, the best rate you’ll get is 2.75%, but it will most likely be closer to 3%. At 3%, your monthly payment will be just $843.
The total cost of the 15-year loan ends up being $240,044. The total cost of the 30-year loan at 3% jumps up to $303,554. The extra 15 years end up adding over $100,000 to the interest you’ll pay on the home.
My recommendation is to do the 15-year term if you can afford that monthly payment. You’ll be able to pay the loan off more quickly and pay less money overall. Then you can take that money you would have spent on interest and do something else with it.
If you have any questions about loans, or anything else related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.