Getting a Mortgage Loan in Sacramento: Is a 30-Year or 15-Year Mortgage Better?

When buying a home or refinancing your current mortgage in Sacramento, there are many factors to consider when shopping for a home loan. When choosing a mortgage program, determining the length of time you want to spend paying off your mortgage loan is a critical factor.  

A 30-year fixed-rate mortgage has been the standard for decades. But there’s another option—the 15-year fixed-rate mortgage—that gets your mortgage paid off quicker and traditionally comes with a lower interest rate.

What Are the Differences Between 30-Year vs. 15-Year Mortgages?

The 15-year mortgage might sound like a no-brainer due to lower interest rates and a shorter loan term, but the downside is that your monthly payments will be higher.  

When choosing the right home loan, it comes down to what best fits your circumstances. Do you need the lowest monthly mortgage payment possible, or are you more concerned with the total cost over the life of the loan? 

To help you decide which mortgage makes the most sense for you, we’re breaking down the pros and cons of the longer and shorter loan terms below.

Pros and Cons of a 15-Year Mortgage

The advantages of a 15-year home loan are that you’ll build up equity faster and own your home outright in 15 years. That means you’ll be paying half as many mortgage payments as you would pay toward a 30-year loan, and that’s 15 years sooner that you’ll be debt-free on your home.

Another benefit that comes with a 15-year mortgage is that you’ll save a ton of money on interest. Mortgage lenders historically (but not always) offer lower interest rates on 15-year loans, which lowers your total borrowing cost by thousands of dollars.

There’s one con of a 15-year mortgage, and it’s a big one: a higher monthly payment. Wondering how much higher your monthly mortgage payment would be if you had a 15-year mortgage? Watch the video below to get a clear picture of what a 15-Year vs. 30-Year Mortgage Cost Comparison looks like. 

Pros and Cons of a 30-Year Mortgage

There are many reasons why the 30-year mortgage is the staple for helping a homebuyer achieve the American dream. Although it comes with twice as many mortgage payments as a 15-year mortgage, and more of your money goes toward paying interest, the lower monthly payments are what make this option so popular. A lower mortgage payment means more money you can put toward other expenses or savings each month.

Another benefit of a 30-year mortgage is that you may be able to afford a more expensive home than you would be able to buy with a 15-year mortgage. This is because you have 30 years to pay it off instead of 15 years, which may qualify you for a higher loan amount.

The downside of a 30-year mortgage is its more extended term, which means you’ll be paying more in interest over the life of the loan. Additionally, 30-year loans come with higher interest rates than the mortgage rates on 15-year loans.

Paying Off a 30-Year Mortgage with Extra Payments

If you want to enjoy all the benefits and savings that come with paying off your mortgage sooner, consider making extra payments on your 30-year mortgage. 

Assuming that your mortgage does not have a prepayment penalty, you can pay more toward your principal when your budget allows, without the commitment of having to make consistently higher monthly payments—as you would be required to do with a 15-year mortgage.

You may have the financial capability to pay off your mortgage with extra payments, but do you have the discipline to pay more each month than you have to? It can be tempting to take advantage of a lower monthly payment with the intention of putting more toward the principal each month, but what about those months when you have an unexpected expense, would like to take a vacation, or have to start paying for college tuition?  

If paying off your mortgage as soon as possible is your priority, watch the video below on Paying Off Your 30-Year Mortgage Faster to learn more on how you can go about achieving this.

What’s the Best Fit for You?

The only certainty when evaluating mortgage terms is that the shorter term will save you money over the life of the loan. Still, it will cost you more on a monthly basis. Getting out of debt sooner always sounds appealing, but there could be other factors in your financial situation that make a longer mortgage the better fit for you.

To help you determine what makes the most sense for your scenario, watch this video on 15-Year or 30-Year Mortgage: Is There a “Right” Answer?

And if you’re still not sure whether a 15-year or 30-year mortgage would be your best match, the team at New Way Mortgage in Sacramento is here to help. We take the time to get to know you and your personal goals to recommend financing that’s right for you. Give us a call today at 916-465-6639 to chat about your 2022 homeownership goals.