See exactly how much interest you save by choosing a shorter loan term.
A 30-year mortgage gives you a lower monthly payment, which can make it easier to afford a more expensive home or free up cash for other investments. However, because you are borrowing the money for twice as long, you pay significantly more in interest over the life of the loan.
A 15-year loan forces you to pay down the principal much faster. Because the balance drops rapidly, the bank charges you interest on a smaller amount of money. As you can see in the calculator above, the total interest on a 15-year loan is often less than half of a 30-year loan at the same rate.
If you can comfortably afford the higher monthly payment on a 15-year loan without draining your savings, it is usually the mathematically superior choice. However, if the 15-year payment would make you "house poor" or leave you with no emergency fund, the 30-year loan is the safer bet. You can always get a 30-year loan and make extra principal payments later to pay it off early.
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