I received this question from Jennifer L. over the weekend – “My husband and I are about to start the pre-approval process for a home loan, and I was wondering what you thought of 15 year versus 30 year mortgages. We are considering and will probably qualify for either, but we are not sure which one to go with. Thanks so much!”
Thanks for the question, Jennifer, and congrats on getting started on the home-buying process! It is a great time to buy a home, and I hope you find what you are looking for. As for my thoughts on 15 year versus 30 year mortgages, I definitely have my opinion on the choice. And while I am not a financial planner, and you should definitely seek the advice of a professional before you sign any papers, I can tell you what I think about which one I would choose for myself and why I would choose it.
If I were getting a mortgage, I would definitely be getting a 30 year fixed-rate one, even if I could pay it off in 15 years. This to me is a no-brainer, as it gives you a lot more flexibility in when and how you pay your mortgage. If you are in good times and you have the ability/desire to pay more on your mortgage, you can – and possibly even pay it off in the 15 years you were considering getting the loan for. But if your priorities change, or you lose a job, or something else happens with your family, your “regular” mortgage payment should be low enough for you to continue making the payments and not lose your home.
Just because you sign up for a 30 year mortgage, it normally doesn’t mean that you cannot pay it off in 15 years. (Be sure to check with your lender to make sure there are no pre-payment penalties) If you can do it, that’s great – and congratulations! But if you cannot, or can only afford to pay a little extra on that 30 year mortgage, that’s fine too, as at least you won’t be stretching and trying to make ends meet every month. Having a payment that is too big for you is just not worth the price of admission of you ask me!
So there you have it – I am all for a 30 year mortgage, even if you think you can afford or pay off a 15 year mortgage instead. Even if you make a very good living, getting the 30 year one gives you two options, the high and/or lower payment, whereas a 15 year mortgage gives you only one – the higher payment. I would go with the 30 year mortgage.
What do you guys think? What would you do? What did you do and why?