When selecting a fixed-rate mortgage, a prospective borrower has to determine how many years to finance the loan. Some financial institutions offer 10- and 20-year fixed-rate mortgages as well as 15- and 30-year fixed-rate home loans.

For the purpose of comparison, this worksheet takes a look at 15-year and 30-year fixed-rate loans.

The payments on a 30-year mortgage are generally lower than 15-year loans, but their interest rates tend to be higher. The lower payment comes from spreading out the loan over twice as many payments. Because of the longer time frame, a 30-year mortgage owner pays more in interest payments than a 15-year mortgage holder.

Tip: Payment Practices. Depending on the loan, a home buyer who chooses a 30-year mortgage may have the option to make extra payments. In a sense, this enables the borrower to treat the long-term loan like a short-term one.

A 15-year mortgage is paid off twice as quickly as a 30-year mortgage, which allows the home buyer to build equity at an accelerated rate. The payments on a 15-year loan are higher — but they aren’t usually twice as high — as a 30-year loan.

To get a better idea of the differences, take a few minutes and add some numbers to the accompanying worksheet.

Fast Fact: Theory in Practice. These days about 90% of homeowners choose 30-year fixed-rate mortgages, 6% choose 15-year fixed-rate loans, and 2% choose adjustable-rate mortgages.
Source: FreddieMac, April 10, 2017

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