30 Year Mortgages vs. Shorter Term Loans

by | Dec 1, 2021

There are many mortgage term options available including 15-year, 20-year and 30-year mortgages.  The most popular is a 30-year mortgage because it allows buyers to have the lowest monthly payment because the loan amount is spread out longer than the other term options.  Many are able to qualify for longer term mortgages because the payments are lower.

Examples of monthly payment differences are as follows:  A 30-year mortgage for $300,000 at 3% interest would be about $1265 per month, not including taxes or insurance.  At the end of the 30-year term, you would end up paying $155,000 in interest to the lender.  A 20-year mortgage of the same amount and interest would give you a monthly payment of $1626 but only $90,000 would be paid to the lender in interest.

You might have a goal to pay your home off in 15 years.  Even if this is your plan, you might want to go with a 30-year mortgage so you have flexibility just in case something happens financially and you can’t make a higher payment for a few months due to hardship.  To pay your loan off sooner, you might consider paying an extra mortgage payment each year or pay extra on your mortgage payments each month.

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