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15-yr vs 30-yr

Suppose you are applying for a loan of 550K, you can choose either 15-yr 4.5% fixed interest rate or 30-yr 5.25% fixed interest rate. Which one would you choose? And why? by ralphiesurfs11 from Honolulu, Hawaii. Mar 4th 2010 Reply


Eddie Stephen (EdtheLoanGuy)
#13 ranked lender in Colorado - 24 contributions

If you look at the numbers it always shows 15 year is betteron a 30 year you will pay $3037 for 360 months = $543,363.33 in intereston a 15 year you will pay $4207 for 180 months = $207,343.36 in interestA difference of $336,020 in interest, but you will also own your house Free & clear after 15 years, so if you took your mortgage payment that you would normally pay and stuck it in a hole for the remaining 15 years you would have saved $550,000 (that's assuming you didn't earn any interest)Not to ShabbyBut thats not the end of the story. The 15 year will cost you an extra $1100 each month, but you will pay off the entire mortgage

Mar 4th 2010
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Hans Bruhner (Hans Bruhner)
#131 ranked lender in California - 116 contributions

That is not an easy question and there will be a different answer for different people. The 15 year loan is a much more efficient loan and you end paying a lot less interest because it is so efficient but a lot of people can't affford the higher payments. The 30 year loan you described would have a pmt. of $3,037/mo. and the 15 year loan you described would have a pmt. of $4,207/mo. If you want the 15 year but can't afford it, you might look at something with a payment in betweeen like a 20 year loan of 5.125% and a pmt. of $3,667/mo. It is more efficient but it is much cheaper than the 15 and only adds 5 years (or saves you 10) depending on your outlook.

Mar 4th 2010
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Daniel Nicolosi (Daniel Nicolosi)
#1 ranked lender in Hawaii - 3 contributions

Aloha Ralph,As Hans said, a 15 year is definitely more efficient. If you can afford the 15 year, I'd go with that. It all depends on your payment comfort/ability level. You could always go with the 20 or 30 year and make higher or extra payments when possible. Although you would be paying a higher rate, you would increase the paydown efficiency.All the best to you.

Mar 4th 2010
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Debbi Lachowsky (debbi.lachowsky)
#4 ranked lender in Arkansas - 13 contributions

As far as the numbers go, a 15 year loan is going to save you a considerable amount of interest verses a 30 year loan. Of course, it all depends on your situation and which payment best fits your comfortability level. If you choose the 15 year loan, your going to see a huge savings over the life of the loan, but keep in mind your payment is considerably larger and the only way to lower it in the future would be to refinance. However, if your not sure about making that larger payment, then you could opt for the 30 year (or a 20 year) and pay additional principal bringing the life of the loan closer to the 15 year mark. Really just depends on your preference of how much you want to spend each month.

Mar 4th 2010
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Nancy J Releford (nancyreleford)
#4 ranked lender in Tennessee - 225 contributions

Obviously you can get a better rate on a 15 yr note. Once you go above a loan amount of $417,000 then the loan becomes a jumbo loan where the interest rate will be higher on both the 30 & 15 yr note. What I always tell my clients, to look long term. You can always do a 30 & pay a couple of extra payments a month and have the same end result. It is easier to do that especially in this economy & the unknown, rather then do a 15 & 6 months into it find out you are stretched too thin. Then you have to go back & do a refi which will cost you more money in the end. Good luck!

Mar 4th 2010
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