Is it Better to get a 15 Year Mortgage or Pay Extra on a 30 Year Mortgage?
15 Year Vs 30 year mortgage: what’s the difference?
In simple language, the main difference between a 15 year and 30 year mortgage is the term. On a 15 year mortgage, you will pay off what you owe (and own your property) within 15 years whereas with a 30 year mortgage, it will take double the time.
Why a 15 year mortgage is better
Depending on your circumstances, a 15 year mortgage can usually be more beneficial. Some of the reasons why are explained below.
Savings on interest
While the interest rate will be the same regardless of the term of your mortgage, as interest is calculated daily and paid with each monthly payment, the shorter the period you pay your mortgage over, the less interest you will pay in total.
Build home equity faster
With a shorter term, your monthly repayments will be higher to ensure the full amount is repaid by the end of your mortgage term. This means that with each repayment you will be building the equity you own in the property faster than if you were paying lower monthly repayments over a longer term. Please note, this is only applicable for mortgages on a capital and interest repayment basis and not interest only repayments.
Own your property in half the time
As long as you have opted to repay your mortgage on a capital and interest only repayment basis, at the end of the 15 year term, you will own your property outright. This means you won’t have to make any more mortgage repayments.
Why a 30 year mortgage is better
In some scenarios, it can be more beneficial to have a mortgage over a longer term, as highlighted below.
Lower monthly repayments
The longer term you opt to repay your mortgage over, the lower your monthly repayment will be. This is one of the reasons that people choose to have a longer term. However, it is important to remember that you will also be paying interest over the longer period and therefore will repay more overall than you would have on a shorter term.
Getting the right mortgage
As explained above, your mortgage term is individual to your personal circumstances, and it is therefore important to make sure you choose the right term for you. Our team of Mortgage Advisers will discuss your personal situation with you in detail, before recommending a term and product to suit you! Remember, there is no right or wrong way as long at the mortgage suits your personal needs best.