Pros and Cons of the 15-Year Mortgage


You may consider taking 15-year mortgage option only if you are sure that you can easily make higher monthly payment and complete your mortgage in a much shorter time and save several thousands of dollars as interest.

In order make such 15 year fixed rate mortgage to be really successful, it is essential that you have a reliable source of income and also you have got sufficient money left with you to manage your household after paying higher amount of monthly instalments.

Usually, out of 6 borrowers only one will opt for such option, as very few people can really afford such higher amounts of monthly installments.  

What are the pros of this option?

Following are few advantages of such option:

  • Get ownership of your home quickly

One of the biggest advantages of choosing this option will be that you can quickly settle your debt and can become the owner of your property. You can feel secured and safe once you have your own home.

  • Build equity faster

In this option by paying higher amount of money as installment, you can save several thousands of dollars as interest component and hence you get a chance to build a good equity.

  • Save money 

Since you can be clear from the debt very quickly, you will save plenty of interest amount but also get a chance to save your money which you have been paying so far as your monthly instalment. 

Thus, you can build a large amount of saving during your period when you are earning your income. 

What are the cons of this option?

Following are few cons of choosing this option:

  • You will pay higher installments 

In this option, you will end up paying 50% more amount of instalment as compared to 30-year mortgage and in addition to that you will also pay insurance and property tax.

Financially, you will always remain very tight for 15 years and in case of any emergency during this period, you may have to borrow money. So, you have to walk on a tight rope.

  • Your equity will be locked up

Since you will end up paying more installments from your income, you cannot build any extra equity during this period.

  • Opportunity cost

In this option all your money will go for paying your instalment and hence you will not be able to invest in any other kind of opportunity that you may get during this period.

For example, if you get an opportunity for high return type of investment, then you cannot make it. 

  • Qualify for less expensive home

You have opted for 15-year mortgage and therefore, in order to pay affordable amount of interest you will be forced to decide for less expensive home. 

  • Loose few tax advantages too

Following are few tax disadvantages of this option:

  • You may lose mortgage interest deduction much sooner when you will pay off your loan within half the usual time
  • Lower interest rate for 15-year loan will reduce the interest amount paid as compared to a 30-year mortgage. Lesser interest means smaller mortgage deduction.