15-year vs. 30-year mortgages: What's the difference?

Choosing the length of your mortgage can be a big decision. Not only will it determine the time it takes to fully pay off your mortgage but also how much you will pay in interest as well as what your monthly payments will be.

The pros of a 15-year mortgage can be the cons of the 30-year mortgage and vice-versa. Learning about 15- and 30-year mortgages will help you understand which is the best option for meeting your goals.

To find out which option you could qualify for and to talk to a Loan Officer, start your mortgage application today!

These are some of the benefits and drawbacks borrowers have to consider when it comes to getting a 15-year mortgage.

• You will fully own your home in 15 years.

• Your interest payments are typically lower.

• You can build home equity quicker.

• Your mortgage will be paid off in half the time.

• Your monthly mortgage payments could be significantly larger.

• Stricter requirements can be harder for you to qualify for.

• Savings for emergencies or investments might be a little tight.

• Higher risk for defaulting on your loan.

Let’s take a look at a few of the pros and cons that can come with borrowers choosing a 30-year mortgage.

• Monthly payments are typically lower due to the longer length of the loan.

• Lower monthly payments make it easier to qualify for.

• Potential for extra funds to go toward savings, investments or additional mortgage payments.

• Could make larger homes more affordable with smaller monthly payments.

• Building your home equity is a slower process.

• The total interest you pay over the life of your loan could be higher.

• You will have this home loan for three decades.

• Your interest rates will typically be higher.

Whether you decide on a 15- or 30-year mortgage, there are things you can do to make sure you are getting the most out of your mortgage.

Mortgage rates can be volatile. Before you decide on a mortgage, you should make sure you are checking the current mortgage rates. These rates will help determine how much in interest you are paying for your loan.

If you get a fixed-rate mortgage, you don’t have to worry about rates as much after signing. If you have an adjustable-rate mortgage, the interest you pay will be tied to wherever current rates are. When rates are lower, you will pay less in interest, but when they are higher, you could pay more.

Though just because you have a fixed-rate mortgage doesn’t mean you should stop checking rates, but we will get into that shortly.

If you are looking to own your home quicker, you can pay it off faster by making larger or extra payments than your monthly requirements. The extra money you pay will go toward the overall principal of your home loan, increasing your home equity quicker than regular monthly payments on a standard 15-year mortgage.

Make sure you talk with your lender before you do this as some may have rules for putting extra money into your mortgage.

Switching your payments to bi-weekly might not seem like a major way to pay off your mortgage quicker, but it allows you to make 26 half payments a year, or 13 full payments. That is one more than you otherwise would have that year, which could cut your 15-year mortgage by a year.

Even paying a little extra every month could shorten your loan term and potentially help you save the money you would have put toward interest.

Refinancing a mortgage allows borrowers to change the terms of their current mortgage to more favorable ones.

If you notice that mortgage rates are dropping, a refinance can switch your mortgage to the lower rate. This is why you should keep an eye on rates even if you already have a mortgage. Through a refinance, mortgage rates on fixed-rate mortgages can drop, and adjustable-rate mortgages can switch to fixed-rate. Refinancing to lower mortgage rates could lower your interest payments and save you money.

But refinancing isn’t only about lowering interest rates.

If you determine that you can pay more toward your monthly payments, refinancing can switch you from a 30-year to a 15-year mortgage. There are also refinancing options for those looking to borrow more money, like you can with a cash-out refinance.

Some refinances do come with closing costs. Make sure you talk with your lender to find out whether the money you end up saving would be worth it.

If you have built up equity in your home, you could access those funds through a HELOC* or home equity loan.

Your home equity is determined by subtracting your remaining mortgage amount from your home’s current value. Your home equity can increase over time or through work you put into your property.

Over time, through home prices in your area increasing or by making your monthly payments, you will build your home equity. Some home improvements or upgrades you make could raise your home’s value and increase your equity. If you are looking to increase your home equity through improvements, make sure you see which improvements have the greatest return on investment.

Tapping into your equity can allow you to access up to 85% of your home equity. You can use the funds from this for any expenses you may have, including home improvements that could increase your equity.

If you are looking to get a 15-year or 30-year mortgage, you can start by completing an online application and talking with a Loan Officer.

An online application can tell you the type of loan you qualify for, including whether you meet the requirements for a 15-year mortgage. After you apply, you will be connected to a professional Loan Officer who can help you through the rest of the mortgage process and make sure you are prepared to buy a home.

Start your online application today to see which type of mortgage you could qualify for.

_{*Rate’s home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions Apply.}

_{All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate. Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.}

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.}

_{Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.}