15- or 30-year Mortgage: Which Is Right for You?

Is a 15- or 30-year mortgage best for you? We can help you decide.

Let’s start with a 15-year mortgage.

These loans help you build equity fast, paying off the home in just 15 years.

The interest rate is typically lower than a 30-year mortgage, which could mean paying around $120,000 less in interest on a $350,000 loan with a 15-year.

That means more money in your pocket.

But to pay off a loan in half the time, you’ll have higher monthly payments which may tighten your monthly budget and limit your home options.

It also makes these loans a little harder to qualify for.

That’s why 30-year mortgages are appealing for many buyers.

The monthly payments are lower than with a 15-year, which gives you more flexibility in how much house you can afford.

And they’re generally easier to qualify for than 15-year mortgages.

But they have higher interest rates, and more of your payments go toward interest.

That means it will take longer to build up equity than a 15-year mortgage.

So, if you don’t mind making higher monthly payments, you can pay off a home faster with a 15-year mortgage.

Or if you need a bigger home or more financial flexibility, consider a 30-year mortgage.

If you need help choosing which loan is right for you, contact a KeyBank Mortgage Loan Officer.

As the names suggest, the main distinction between a 15-year and 30-year mortgage is the length of the terms. That may seem minor, but the difference in term range can have major cost implications.

Is a 15- or 30-year mortgage better?

Although the monthly payments on 30-year mortgages are lower than they are for 15-year loans, their interest rates are higher, and it takes twice as long to pay off. So while you pay higher monthly payments for a 15-year mortgage, you’re paying off more principal sooner. That means going with a 15-year mortgage can save you thousands over the life of the loan.

Check current rates for clients.

When should you consider a 15-year fixed-rate mortgage?

A 15-year fixed-rate mortgage can be attractive because it has a lower interest rate and a shorter lifespan. The fixed rate allows you to set a budget without surprises from rising interest rates. But to take advantage of these perks, you have to be able to afford the higher monthly payment that comes with them. Plus, because the payments are higher, it’s more difficult to qualify for this type of loan. In short, if you can qualify and afford the higher monthly outlay, the 15-year fixed mortgage can be a great way to save money when you buy a home.

15-Year Mortgage

You’ll build equity fast with a 15-year loan and pay off the home in only 15 years. Compared to a 30-year loan, the interest rate is typically lower – which could mean paying significantly less in interest over the life of the loan.

But paying off the loan in half the time means you’ll have higher monthly payments. This may tighten your monthly budget and limit your home options. The bigger payments can also make it harder to qualify for these loans.

bar chart rising

Pros:

  • Build equity faster
  • Shorter path to full homeownership
  • Lower interest rate and shorter life span equal longer-term savings
red and gray house icons

Cons:

  • Tighter range of home affordability
  • Larger monthly payments
  • Harder qualification

If you can qualify and afford the higher monthly outlay, then the 15-year mortgage can be a great way to save money when you buy a home.

When Should You Consider a 30-year Fixed-Rate Mortgage?

A 30-year mortgage is common for several reasons. One, homeowners may be able to deduct the mortgage interest on their taxes. And, especially in the first years of the loan, when most of the monthly payments are allocated toward interest, that can be a significant benefit. Plus, the monthly payments are lower and easier to manage. This makes a 30-year easier to qualify for compared to a 15-year mortgage. The 30-year can be a good option if you plan to stay in the home for several years and can’t afford a 15-year mortgage. Remember, if your financial situation improves, you may be able to start with a 30-year mortgage and refinance to a shorter repayment term down the road.

There are several differences and considerations to keep in mind when choosing between a 15-year mortgage and a 30-year mortgage. You’ll need to weigh the differences to see whether you benefit more from a shorter repayment term and higher payments, or a longer repayment term with lower payments. Also consider whether your financial and living situations may change. For instance, how long you might live in the home. For more personalized recommendations, use the KeyBank mortgage payoff calculator or mortgage qualification calculator.

30-Year Mortgage

The 30-year loan is appealing to many homebuyers because monthly payments are lower than with a 15-year loan. This offers more flexibility in how much house you can afford. Plus, this type of loan is generally easier to qualify for.

Interest rates are higher, though, and more of your payments go toward interest. That means it will take longer to build up equity than with a 15-year mortgage, and you’ll pay more on interest over the life of the loan.

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Pros:

  • Easier qualification
  • Lower and easier-to-manage monthly payments
  • More house for the mortgage
bar chart rising

Cons:

  • Higher interest rate
  • Slow to build equity
  • More of the payments go toward interest

If you need a bigger home or more financial flexibility, then the 30-year loan could be a good option. And if your financial situation improves, then you may be able to refinance to a shorter term later.

The Right Choice for You

Which loan will serve you best? Let your priorities help you decide.

Priority

15-Year Mortgage Loan

30-Year Mortgage Loan

I want a lower interest rate.

X

  

I want lower monthly payments.

  

X

I want to build equity faster and fully own my home sooner.

X

  

I want to pay less money over the life of the loan.

X

  

I want more flexibility in how much house I can afford.

  

X

I want to be able to qualify for a larger loan amount.

  

X

Have More Questions about Mortgages and Home of Loans?

For more personalized recommendations, use the KeyBank mortgage payoff calculator or mortgage qualification calculator. To learn more, talk with a mortgage loan officer (MLO) or visit our Financial Wellness Center

Please consult your tax advisor regarding the deductibility of interest.

This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice.

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