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Bottom Line Up Front

  • Because you’ll pay less in interest with a 15-year mortgage, you’ll save money during the life of your loan. 
  • With a 15-year mortgage, your monthly payments will be larger, but you’ll build home equity faster.
  • You’ll want to consider your monthly budget to determine whether larger payments are feasible.

Time to Read

4 minutes

August 1, 2022

Wondering if a shorter-term mortgage makes sense? Understanding the pros and cons of a 15-year mortgage can help you decide if this is the right option for you.

Pros

Pay less interest.

The biggest advantage to a 15-year mortgage is saving money. Because a 15-year loan typically has a lower interest rate than a 30-year loan and you pay the loan off faster, you’ll save money during the life of your loan.

Here’s an example: For a $250,000 loan with a 10% down payment, your rate for a 30-year loan might be 6.75%. For a 15-year mortgage, it would be lower, say 5.25%.

You’ll pay $367,112 in interest over 30 years. The same loan at a 15-year term will cost you only $122,919 in interest—a savings of $244,193. (These figures don’t include other costs like homeowners insurance or taxes.) Our mortgage payment calculator can help you calculate the difference in your personal monthly payment.

Build equity faster.

Since a 15-year term comes with a higher monthly payment toward the principal, you’ll build home equity faster. You can access that equity with a home equity loan or line of credit to pay for things like college or renovating your home.

Own your home faster.

Not only will you build equity faster, but you’ll also pay off your home in half the time compared to a 30-year loan. For many people, the security of knowing their home is fully paid off is a big financial goal.

Cons

Larger monthly payments

Because you’ll be paying off your home in half the time, your monthly payments will be larger compared to payments on a 30-year term. Will your budget allow you to do that? It might make more sense to keep the lower, fixed payments of a 30-year loan and pay extra toward principal when you have a surplus in your budget. This strategy will help you pay off your home faster, yet still offers flexibility.

Less money for other expenses

Investing more of your monthly budget into your mortgage means additional funds might not be available for other goals and expenses.

Potentially a smaller loan amount

Because the monthly payments will be higher, you may only qualify for a smaller total loan amount. Stretching your loan over 30 years may enable you to buy a more expensive home.

Ready to Take the Next Step?

In short, a 15-year mortgage is a great option if you can afford higher monthly payments and still meet your other financial goals. At Navy Federal Credit Union, we can help guide you through the home loan process. Whether you’re looking to refinance or you’d like to start shopping for a mortgage, we’re here to help.

Next Steps Next Steps

  1. Build a budget that includes your monthly income and expenses to determine how much you can afford to pay toward your mortgage each month.
  2. Use Navy Federal’s mortgage payment calculator to see how much your estimated payments would be for a new home. Compare the payments on a 15-year term versus a 30-year term. 
  3. If you’re still deciding, factor in other things like how fast you’d like to pay off your home and whether you expect to need more flexibility in your monthly budget.

Disclosures

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.