5 Times You Might Want to Use a 15-year Loan

5 Times You Might Want to Use a 15-year Loan

The 30-year mortgage might be the most common, but it’s not always the best choice for every homebuyer. In fact, it’s often the most expensive mortgage you can go with — at least in the long term. 

Just consider, for example, a $200,000 mortgage loan at today’s average rates per Freddie Mac. On a 30-year mortgage at 2.73%, you’d pay more than $93,000 in interest over the course of your loan. With a 15-year loan at 2.19% (they come with lower rates than 30-year loans), you’d pay under $35,000 in interest. 

But that’s just one of the many benefits of a 15-year loan, and there are plenty more that can benefit both new buyers and existing homeowners.

Not sure what type of mortgage loan you should be using? Here’s when a 15-year loan is probably best.

1. You want to pay the least interest.

Shorter-term loans come with lower interest costs — especially in the long run. They also come with lower interest rates, too. This can mean thousands (usually tens of thousands) saved over time.

2. You want your loan paid off as fast as possible.

A 15-year mortgage comes with higher monthly payments, but that also means you pay down your loan faster. If you were to take out a loan today, in February 2021, you’d have your 15-year loan paid off by February 2036 at the latest. On a 30-year loan? You’d have that mortgage until 2051. 

3. You’re refinancing.

A 15-year loan is a great option if you’re refinancing — particularly right now. While mortgage rates are still low, you can often reduce your term, snag a lower interest rate, and still maintain a monthly payment that’s roughly the same as what you’re paying now. (And isn’t that the definition of a win-win?)

4. You want to put more toward retirement or other higher-yield investments.

With a 15-year mortgage, you’ll get rid of that monthly mortgage payment much faster. That means more cash flow and more funds to put toward retirement, the stock market, or other, higher-yield investments. Plus, you’ll save more on interest, which means more in long-term wealth anyway.

5. You have solid, consistent income. 

There are big benefits to using a 15-year loan, but they do come with higher monthly payments. If you have solid, consistent income you know can handle the higher payments, then these loans are typically your best bet. You’ll save the most in the long run, and you’ll have your home paid off much faster, too.

The best loan varies

Get in touch with an Embrace Home Loan officer in your area for help choosing the best loan for your specific situation. 

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Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.