Why ’15-Year vs. 30-Year Mortgage’ Blogs Are Misleading

Whether you’re conducting preliminary research prior to starting your house hunt or reviewing your current mortgage, chances are you’ve come across a few “15 vs. 30-year mortgage” blogs. Although it’s easy to use this framework to compare these common fixed-rate mortgage options, it makes the mistake of positing this as an either/or proposition and doesn’t capture the bigger picture. Rather than ask “Which fixed-rate loan option is better,” you should be asking “Which fixed-rate loan makes the most sense for me in the long-term?”

What is a Fixed-Rate Mortgage Loan?

Let’s talk about fixed-rate mortgage loans. As implied by its name, a fixed-rate mortgage loan maintains a fixed repayment rate for the entire life of the loan. Although the amount of principal and interest paid each month can fluctuate, the total payment remains the same. This predictability makes fixed-rate loans — also known as “vanilla wafer” loans because they are so straightforward — popular with buyers who intend to stay in their home for a long time.

Most blogs focus on 15-year and 30-year mortgages because they’re the most popular types of fixed-rate mortgage. The two are essentially the same, with one key exception: The shorter the mortgage term, the higher the monthly payment, and vice versa. Although many buyers prefer 30-year mortgages because of their lower monthly payment, the overall cost of a 30-year mortgage is actually higher than a 15-year mortgage due to higher interest rate paid over a longer period of time. One isn’t necessarily superior to the other.

What many buyers don’t realize is that 15- and 30-year mortgages aren’t the only fixed-rate loan options available. Fixed-rate loans can have a mortgage term as short as eight[MC1]  years to as long as 40 years and anywhere in between. Buyers who choose to apply for a fixed-rate mortgage can even pay in advance of their mortgage to pay down their interest faster. By only looking at 15- or 30-year mortgages rather than the full spectrum of mortgage terms, you risk missing out on the best mortgage option for your specific situation.

Every Buyer’s Needs Are Different

Before looking at fixed-rate mortgage options, sit down and take a moment to think about your personal goals, both immediate and long-term. Maybe you’re a first time home buyer, but plan to have children someday and eventually move into a larger home. Maybe you’re currently in the running for a job promotion and dream of an early retirement. Consider how these goals factor into your financial planning.

Now, think about your present financial obligations. Maybe you’re paying down credit card debt, making regular auto payments, paying off student loans or putting your own children through school — maybe you’re doing all of the above. Your personal goals and your financial obligations all play important roles in determining which fixed-rate mortgage term makes the most sense for you.

Although it’s easy to feel demoralized when a friend or co-worker tells you they’re currently paying down a 10- or 15-year mortgage when you’re stuck paying a 20- or 30-year mortgage, try to keep in mind that every individual’s needs are different. You can’t allow what works for someone else to influence your decisions because your goals aren’t the same as theirs. Also, try to remember that although your loan rate might be fixed, your personal situation isn’t. What you need now might not be the same 10 years from now, or even five.

It’s Time to Work With an Expert

That’s why it’s important to work with a mortgage broker, regardless of whether you’re evaluating repayment options or are having second thoughts about your current fixed-rate mortgage term. A mortgage broker can evaluate your financial situation and work closely with you to develop a plan for home ownership or update your mortgage payment plan to reflect major life changes.

Finding the right loan can be stressful — fortunately, Blue Water Mortgage Corporation is here to help. With over 150 years of collective experience, our loan officers have the expertise to assess your specific financial situation, provide personalized advice and help you develop a long-term mortgage plan. Start a conversation with Blue Water today — we offer 24/7 availability, including weekends, so you’ll never have to go it alone.

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.