Modesto Homebuyers: 15-Year Mortgage vs. 30-Year

Modesto Homebuyers: 15-Year Mortgage vs. 30-Year


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Modesto homebuyers will be faced with several different options when you are obtaining a mortgage. One of the biggest options you will have to choose from is the length of your loan. Many Modesto homebuyers choose the traditional 30-year mortgage, but that does not necessarily mean that it is the best option for you.

As you compare the two mortgages, consider the following thoughts.

Mortgage 101

The difference between the two mortgages is obvious. One mortgage is for 30 years and the other is only for 15 years. But how does that affect you as Modesto homebuyers?

The longer mortgage offers much lower payments since the loan total is split up over twice as many months. The 15-year mortgage has larger monthly payments even though they usually have a lower rate than the traditional 30-year mortgage. The choice might seem obvious to you, but there is a case to be made for the15-year mortgage.

The Case for a 15-Year Mortgage

While the lower monthly payments of a traditional loan sound like a great deal, you will save money over the life of your loan with a 15-year mortgage. Due to the shorter time period you save a chunk of money on the total interest that you end up paying in the end.

Here is an example of how much you can save if you are obtaining a mortgage for $150,000 using the mortgage rates of 3.03% for a 15-year mortgage and 3.34 for a 30-year mortgage:

Monthly Payments                           Total Interest

30-year mortgage                           $660                                                 $87,687

15-year mortgage                           $1,038                                              $36,847

That means that over the life of the loan Modesto homeowners will save an astounding $50,840. While you save a significant amount of month you will also own your house in half the time, meaning that you will have no mortgage payment and extra $1,038 in your pocket each month.

What About a 30-Year Mortgage?

Sometimes the option of paying that higher payment that comes with the shorter line is just not a realistic option for Modesto homebuyers. If that is the case for you, don’t be discouraged looking at the numbers; you can still save some money.

The majority of traditional 30-year mortgages will not penalize you for paying off your loan early. That means that you can choose to make extra payment on the principal throughout the life of the loan whenever it works out for you. Any time that you pay down on your principal with extra payments you lower the overall amount of interest that you will pay. By doing this you gain the freedom of the lower payments, but can still reduce your overall interest amount.

When deciding which loan is right for you make sure to consider what your future holds as well. Once you have obtained your mortgage you are locked in to paying the total plus interest back each month until you either pay it off or are able to sell the house. If you are interested in the 15-year mortgage consider if you can commit long term to the higher payment.

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