Deciding on a Mortgage Term

Aside from the fixed vs. adjustable rate dilemma, selecting a 15-year or 30-year mortgage term is the biggest decision homebuyers have to make with online mortgages. Fixed-rate mortgages usually come with two term options: 15 years or 30 years. Here are the pros and cons of each choice.

30-Year Mortgage

30-year online mortgages have several advantages.  For one, you will enjoy lower monthly payments and not have to worry about your rates or payments fluctuating for 30 years.  In addition, you will be able to deduct more interest expense from your taxes.  On the other hand, a 30-year mortgage slows down the rate with which you build equity in your home.  Similarly, your interest rates and overall interest cost will be much higher on a 30-year loan. 

15-Year Mortgage

A 15-year mortgage also has its share of benefits.  First, shorter-term online mortgages allow the buyer to build equity in the home more quickly because of shorter amortization schedules.  This means you will own your home faster than you otherwise would and will be able to access the equity in your home for loans and other lines of credit.  Secondly, interest rates are much lower on 15-year online mortgages than on 30-year mortgages.  Finally, you will dramatically reduce your total interest expense by going with a shorter-term loan.  Conversely, a 15-year mortgage also has some drawbacks.  For one, your monthly payments will be considerably higher than on a 30-year loan, which means you will have less money to devote to other bills and investments.  Likewise, 15-year mortgages may force buyers to purchase a smaller house than they could afford with a 30-year mortgage. Check out our home page for more about online mortgages.