Higher monthly payments can result in a regimented budget 
and tight cash flow for the next 15 years. (Photo: Shutterstock).
Greg Roller, Elevations Credit Union
Greg Roller, Elevations Credit Union

Are you considering a 15-year mortgage loan? While there are a number of pros like a lower interest rate and the ability to pay off your home faster and build equity quicker, it’s important to be aware of the cons while considering your unique home buying situation.

Saving money in the long run is a definite pro to a 15-year loan, but many homebuyers decide against it because of the steeper monthly payments. Higher monthly payments can result in a regimented budget and tight cash flow for the next 15 years. Your money will be going toward your home versus other options, like retirement.

If you decide to go with a 30-year term, you can still pay off your mortgage faster if you want. Just because you have a 30-year rate doesn’t mean you can’t pay it off early, and with a 30-year term, you aren’t locked into a higher payment every month like you’d be with a 15-year term. Ask your mortgage professional about your options to pay off your mortgage faster. 

Plus, in the event that money becomes an issue, you’ll feel at ease knowing your mortgage is at a more affordable price with a 30-year loan. This can help alleviate stress on your personal bank account. 

The bottom line 

Here’s an example below with a mortgage amount of $500,000 with a 20% down payment and loans available at 4.25% for 15 years or 5% for 30 years. 

As you can see, a 15-year loan has a monthly payment that’s $907 more per month than the 30-year. However, a 15-year loan also has substantial savings in interest over time.

For more about the upsides to 15-year mortgages, visit elevationscu.com/mortgageblog.  

By Greg Roller, Elevations Credit Union. Greg is a Mortgage Loan Originator at Elevations Credit Union in Boulder. If you have questions regarding mortgages, please call 303.807.4777 or email Greg.Roller@elevationscu.com. NMLS# 809384. Elevations Credit Union, an Equal Opportunity Lender.