How to decide whether a 15year or a 30year mortgage is best for you

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By: tiarajoseph11
on 18th Dec,2013

Here are some questions which you need to ask yourself in order to make the decision that suits you the best.
How to decide whether a 15year or a 30year mortgage is best for you


Are you one of them who cannot decide which one is good for you – a 15-year mortgage or a 30-year home loan? Both the loans have pros and cons and you need to decide which one works best for you. Here are some questions which you need to ask yourself in order to make the decision that suits you the best.


Q1: Is this your first home which you are going to purchase?

If you are a first-time homebuyer, that is, you are buying a property for the first time, then the monthly payments on a 30-year mortgage loan may make it easier for you to make your loan payments on time. You may also go for adjustable rate mortgages, which you can stay current by making comparatively lesser payments during the initial years. However, if you go for adjustable rate mortgage, then be prepared to make more payments if the interest rate increases after the initial years of low rate interest.


Q2: Does your financial status allow you to repay the loan in 15 years?

The financial advisers say that it is always better to go for a 15-year mortgage loan if you can make the monthly payments comfortably. Doing so, you can save a significant amount which otherwise you will have to make on interest payments for the rest 15 years. However, at the same time, the monthly payments will be comparatively more on a 15-year loan. It is advisable to not put your entire monthly income to repay your home loan because you need to save and make payments on your other debts, such as credit cards, too.


Q3: How many years are left for your retirement from your job?

When you will retire from your job is also an important factor you should consider while deciding whether to take out a 15-year mortgage or a 30-year home loan. If you are at 40 years of age or older, then it is better if you go for a 15-year mortgage loan, because you might want to retire with no debt on your home.


Q4: Do you want to continue with this loan or have plan to refinance?

Refinancing is a process by which you can replace your current mortgage loan with a new one. If you plan to refinance your current mortgage loan in the near future, then you can take out a 30-year loan and refinance it into a 15-year loan after some years. This will help you shorten the loan term while keeping your monthly payments almost the same.


Q5: How much are you able to save every month?

You need to be disciplined in order to manage a 15-year mortgage loan. However, taking out a 15-year mortgage forces you to save more in order to stay current on your loan. To decide this, plan a budget by taking into consideration your other expenditure and decide whether or not you can manage a 15-year home loan comfortably. Remember, you also need to save a certain amount for the rainy days after making your debt payments and meeting your daily necessities.


If it is difficult for you to make the decision all by yourself, you can consult a financial advisor, who can assess your financial condition and help you decide which one will work for you the best – a 15-year mortgage or a 30-year home loan. Whatever decision you make, remember that buying a home and taking out a mortgage loan is a huge decision. Therefore, consider the pros and cons carefully so that you can make the best possible decision, which will benefit your financial condition and will help you reach your monetary goals within your designated time period.


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