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4 years ago
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15 vs 30 year loan terms

What are the general advantages and disadvantages of both 15 year and 30 year loan terms? HOw did you decide upon which one to get?
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4 years ago
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It's purely mathematical. You'll pay a lot less total interest over the life of the loan on a 15-year; slighly more than a 50% savings in the scenario I evaluated. You may get a rate break in addition to that. You'll also be done paying it off 15 years sooner. The tradeoff is that the monthly payment will be higher (when I compared, it was around 20-25% higher for the 15-year).

If you aren't planning to own the place more than 5-7 years, it may not make much of a difference, but if you held on to the place for 30 years, you'll have spent a lot less. On the other hand, if you were clever and invested the difference in a higher-yielding investment than real estate, it's possible you wouldn't see a difference.

If the 15-year mortgage's monthly payment is manageable for you, I would go for it. But in urban markets, it's often really challenging to find a home that has a manageable monthly payment on a 15 year schedule.

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3 years ago
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The main reason for choosing a 30 year term loan (with NO prepayment penalty) is the lower payment.
Nobody knows what 'life' will throw at them in the future (i.e. job loss, death of spouse, etc.).
If you are in a financial position to make more than the monthly payment, then you can do so, making sure to specify the additional payment is to be applied against the principal - this will reduce the term of the loan ... you could even do this and reduce your 30 year term loan down to 25, 20, or 15 years!
If you should run into difficult financial times during the term of the loan, then you revert back to paying only the monthly payment, which can give you time to re-adjust your life while continuing to make the payments on time.

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