15-year and 30-year mortgage Pros and cons

What are the Pros and Cons of a 15 Year Mortgage?

There is more than one benefit with a 15 year mortgage. One great advantage is that the mortgage interest rate on a 15 year mortgage is lower than a 30 year mortgage interest rate--often by .5 point or more.

The other benefit is that the mortgage loan is paid off in 15 years rather than 30 years--allowing you to pay a lot less interest than if you amortized the mortgage loan payment over 30 years. However, because of the shorter loan amortization period, your monthly payment will be higher than if you pay the loan over 30 years.

Let's Compare a 15 Year Mortgage vs. the 30 Year Mortgage

Let's change the 30 year loan above to a 15 year mortgage. The same loan amount of $415,000 @ 4.95% (the shorter amortization period allows you to get a lower interest rate) for 15 years gives us: $415,000 @ 4.95% interest for 15 years = $3,271 per month. The interest paid on our 15 year mortgage drops to $173,779. That's $294,895 less interest paid.


Own your home in half the time.
Builds equity faster while paying significantly less in interest.
Interest rates are typically 0.5 to 1 percentage points lower.


Monthly payments are higher.
The maximum mortgage interest tax deduction is less because the borrower is paying less interest over the life of the loan.
If the borrower becomes unemployed or if their income takes a dramatic hit because of a financial emergency, it will be harder to keep up with the payments.