The answer to Which is Best the 30 Year Mortgage Vs 15 Year Mortgage depends on your situation. There is no simple answer and you will get varying answers depending on who you listen to. We’re going to look at the question of 30 yr vs 15 yr mortgage from a couple of perspectives to hopefully give you some direction for your mortgage. By the way, the following discussion applies to VA Loans, FHA Loans, and Conventional Mortgages. Along these same lines, no matter whether you are getting low VA rates, or FHA rates, or Conventional rates the discuss that follows is the same.
30 Yr VS 15 Yr – Pure Financial Perspective
This section is like from your financial planner. 30 year mortgages typically have slightly higher interest rates than 15 year and even 20 year mortgages, which means you will pay more finance charges. Also, 30 year mortgages take 30 years to payback which is twice as long as a 15 year mortgage so over time you will end up paying a lot more interest in the form of finance charges than you will with a 15 year mortgage.
Bottom line – shorter term mortgages means more money in your pocket that you can invest in a 401K, IRA or some other form of savings account.
15 Yr VS 30 Yr Payment – Practical Financial Perspective
This section is like from your practical friend side. The down side of getting a shorter term mortgage is that you will have a larger mortgage payment per month than you would with a 30 year mortgage. While a 15 year mortgage sounds good on paper for saving finance charges, it does force you into having a bigger monthly payment. You may not be concerned with a larger payment because of your current employment situation, but what happens if things change with your job or your income? You may be put int a situation where you have to make a larger payment than you can afford whereas if you would have take a 30 year term mortgage you would have a smaller monthly payment.
You can almost always make a larger mortgage payment if you want. But try cutting back on your mortgage payment if you run into a slow couple of months because of your job. With the current economic fluctuations in 2011, why take a chance on a cheaper, higher risk monthly payment when you can still make that same payment, but cut back if you need to given a change in your financial situation?