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Choosing from a 15 year or 30 year mortgage is an important financial decision. Some common considerations are:

• Interest savings on 15 year mortgage payments as compared to a 30 year Mortgage
• Additional monthly payments in a 15 year term as compared to lower monthly payments for a 30 year schedule.
• Interest rates are higher for a 30 year mortgage which implies higher rate, more points or both.
• If rates for both 15 and 30 year mortgage are same, then you may be required to pay 1-3 points upfront for a 30 year mortgage.

Reinvesting savings from 15 years mortgage at 9% interest (the savings are in the form of points that are not required to be paid upfront as in a 30 year mortgage) and 30 years mortgage at the same rate of interest (the difference amount you save every month as compared to a 15 year mortgage monthly payment) at the same rate of interest generates:

• An equal amount as the mortgage balance after 15 years for the amount invested from savings of the 30 year mortgage. This implies the investment can help you pay your outstanding mortgage liability in 15 years.

• The savings from the 15 year mortgage leaves you with surplus funds.

This is an indication of the fact that though 15 year mortgage payments have an additional payment burden the 15 year term costs you much lesser than a 30 year term. It is important to note that it is subject to personal financial situations and in case of favorable financial resources one can change a 30 year term mortgage to a 15 year term.

Taxation is also an important consideration when choosing the mortgage term.  The mortgage impact on taxation includes some of the following considerations:

• Interest paid on mortgage payments reduces taxable income.
• Higher Interest payments (30 year mortgage) can considerably reduce taxable income
• Reinvesting difference can shorten a 30 year mortgage term but one must account for taxation on earnings from investment.

Which is better: a 15 or 30 year mortgage term?

15 year term saves you INTEREST_DIFFERENCE, but costs an additional PAYMENT_DIFFERENCE per month.

A 15 year mortgage term will save you INTEREST_DIFFERENCE in interest, but only if you can afford an additional PAYMENT_DIFFERENCE per month. Total payments for a LOAN_AMOUNT, 15 year mortgage at TERM15_INTEREST_RATE is TERM15_TOTAL_OF_PAYMENTS. Total payments for the same loan with a 30 year mortgage at TERM30_INTEREST_RATE is TERM30_TOTAL_OF_PAYMENTS.

Mortgage Comparison   15 year mortgage 30 year mortgage Loan amount LOAN_AMOUNT LOAN_AMOUNT Interest rate TERM15_INTEREST_RATE TERM30_INTEREST_RATE Monthly payment TERM15_MONTHLY_PI TERM30_MONTHLY_PI Total interest TERM15_INTEREST_PAID TERM30_INTEREST_PAID Total payments TERM15_TOTAL_OF_PAYMENTS TERM30_TOTAL_OF_PAYMENTS

Interest and Income Taxes

Changing your mortgage term can make a difference in not only the interest you pay, but your income taxes. A longer mortgage term can increase your income tax deduction. Take a look at the results below, to see how the different terms stack up.

Interest and Income Tax Comparison   15 year mortgage 30 year mortgage First months interest TERM15_FIRST_MONTH_INTEREST TERM30_FIRST_MONTH_INTEREST First months principal TERM15_FIRST_MONTH_PRINCIPAL TERM30_FIRST_MONTH_PRINCIPAL First years interest TERM15_FIRST_YEAR_INTEREST TERM30_FIRST_YEAR_INTEREST First years tax savings TERM15_FIRST_YEAR_TAX_SAVINGS TERM30_FIRST_YEAR_TAX_SAVINGS Avg. years tax savings TERM15_AVG_TAX_SAVINGS TERM30_AVG_TAX_SAVINGS

15 Year Payment schedule

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TERM15_SCHEDULE

30 Year Payment schedule

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TERM30_SCHEDULE

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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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Definitions

Mortgage amount

Original or expected balance for your mortgage.

Interest rate

Annual interest rate for your mortgage. Interest rates are generally lower for shorter term mortgages.

Marginal tax rate

This is your combined state and federal tax rate. This is used to calculate your potential income tax savings by deducting your mortgage interest.

Monthly payment

Monthly principal and interest payment (PI). Both 30 year and 15 year mortgages are shown.

Total payments

Total of all monthly payments over the full term of the mortgage. Both 30 year and 15 year mortgages are shown.

Total interest

Total of all interest paid over the full term of the mortgage. Both 30 year and 15 year mortgages are shown.

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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.