Is paying off a 30-year mortgage in 15 years the same as a 15 year mortgage?

Asked by: Dr. Marshall Collier  |  Last update: April 24, 2023
Score: 4.1/5 (19 votes)

Both a 15-year and 30-year mortgage can have fixed interest rates and fixed monthly payments over the life of the loan. However, a 15-year mortgage means you will have your home paid off in 15 years rather than the full, 30-year mortgage so long as you make the required minimum monthly payments.

Is it better to get a 30 year mortgage and pay it off in 15 years?

If your aim is to pay off the mortgage sooner and you can afford higher monthly payments, a 15-year loan might be a better choice. The lower monthly payment of a 30-year loan, on the other hand, may allow you to buy more house or free up funds for other financial goals.

Can I pay a 30 year mortgage in 15 years?

Pay extra toward your mortgage principal each month: After you've made your regularly scheduled mortgage payment, any extra cash goes directly toward paying down your mortgage principal. If you make an extra payment of $700 a month, you'll pay off your mortgage in about 15 years and save about $128,000 in interest.

Why is it better to take out a 15-year mortgage instead of a 30 year mortgage?

Borrowers with a 15-year term pay more per month than those with a 30-year term. In return, they receive a lower interest rate, pay their mortgage debt in half the time and can save tens of thousands of dollars over the life of their mortgage.

What happens if you make 1 extra mortgage payment a year on a 15-year mortgage?

The amount saved will vary based on the initial size of the loan and interest rate. Simply by making an additional payment over the life of a 15-year mortgage for $300,000 dollars at an interest rate of 5%, amounts to an eventual savings of up to 200 dollars monthly.

PSA: Why you SHOULDN’T get a 15-year Mortgage

20 related questions found

How much faster do you pay off a 15 year mortgage with biweekly payments?

Biweekly payments accelerate your mortgage payoff by paying 1/2 of your normal monthly payment every two weeks. By the end of each year, you will have paid the equivalent of 13 monthly payments instead of 12. This simple technique can shave years off your mortgage and save you thousands of dollars in interest.

What is the fastest way to pay off a 15 year mortgage?

Five ways to pay off your mortgage early
  1. Refinance to a shorter term. ...
  2. Make extra principal payments. ...
  3. Make one extra mortgage payment per year (consider bi-weekly payments) ...
  4. Recast your mortgage instead of refinancing. ...
  5. Reduce your balance with a lump-sum payment.

What are the disadvantages of a 15-year mortgage?

The main drawback to a 15-year mortgage is that monthly payments are much higher since you have to pay off the same amount in half the time. As a result, many homeowners simply can't swing the monthly payments. It's up to you and your loan officer to compare the costs — and potential savings — of a 15 vs.

How can I pay off my 30-year mortgage in 10 years?

How to Pay Your 30-Year Mortgage in 10 Years
  1. Buy a Smaller Home. Really consider how much home you need to buy. ...
  2. Make a Bigger Down Payment. ...
  3. Get Rid of High-Interest Debt First. ...
  4. Prioritize Your Mortgage Payments. ...
  5. Make a Bigger Payment Each Month. ...
  6. Put Windfalls Toward Your Principal. ...
  7. Earn Side Income. ...
  8. Refinance Your Mortgage.

How can I pay off a 15-year mortgage in 10 years?

12 Expert Tips to Pay Down Your Mortgage in 10 Years or Less
  1. Purchase a home you can afford.
  2. Understand and utilize mortgage points.
  3. Crunch the numbers.
  4. Pay down your other debts.
  5. Pay extra.
  6. Make biweekly payments.
  7. Be frugal.
  8. Hit the principal early.

Is it smart to pay off your house early?

Paying off your mortgage early is a good way to free up monthly cashflow and pay less in interest. But you'll lose your mortgage interest tax deduction, and you'd probably earn more by investing instead. Before making your decision, consider how you would use the extra money each month.

Is it better to pay lump sum off mortgage or extra monthly?

Regardless of the amount of funds applied towards the principal, paying extra installments towards your loan makes an enormous difference in the amount of interest paid over the life of the loan. Additionally, the term of the mortgage can be drastically reduced by making extra payments or a lump sum.

What is the fastest way to pay off your mortgage?

How to Pay Off Your Mortgage Faster
  1. Make biweekly payments.
  2. Budget for an extra payment each year.
  3. Send extra money for the principal each month.
  4. Recast your mortgage.
  5. Refinance your mortgage.
  6. Select a flexible-term mortgage.
  7. Consider an adjustable-rate mortgage.

What happens if I make a large principal payment on my mortgage?

Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance and interest charged on it.

What happens if I make 4 extra mortgage payments a year?

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments. The extra payments will allow you to pay off your remaining loan balance 3 years earlier.

How many years can you take off your mortgage by paying extra?

Adding Extra Each Month

A 30 year mortgage (360 months) can be reduced to about 24 years (279 months) – this represents a savings of 6 years!

What happens if I pay an extra $100 a month on my mortgage?

In this scenario, an extra principal payment of $100 per month can shorten your mortgage term by nearly 5 years, saving over $25,000 in interest payments. If you're able to make $200 in extra principal payments each month, you could shorten your mortgage term by eight years and save over $43,000 in interest.

Does a 15-year mortgage ever make sense?

A 15-year, fixed-rate mortgage is a great tool for borrowers who can afford the higher payments while still saving and investing for retirement. Paying off a mortgage gives many people a feeling of independence, safety and accomplishment. But if your income is uncertain or variable, avoid the 15-year mortgage.

What percentage of people get a 15-year mortgage?

Because less than 10 percent of homeowners have 15-year mortgages, Bechtel says it's not an option for everyone, mainly because of the higher payments.

Do you get a lower interest rate with a 15-year mortgage?

The interest rate is lower on a 15-year mortgage, and because the term is half as long, you'll pay a lot less interest over the life of the loan. Of course, that means your payment will be higher, too, than with a 30-year mortgage.

Is it better to pay off mortgage or save money?

It's typically smarter to pay down your mortgage as much as possible at the very beginning of the loan to save yourself from paying more interest later. If you're somewhere near the later years of your mortgage, it may be more valuable to put your money into retirement accounts or other investments.

Does it matter if you pay your mortgage on the 1st or 15th?

Well, mortgage payments are generally due on the first of the month, every month, until the loan reaches maturity, or until you sell the property. So it doesn't actually matter when your mortgage funds – if you close on the 5th of the month or the 15th, the pesky mortgage is still due on the first.

Is there a downside to biweekly mortgage payments?

Drawbacks to biweekly payments

One drawback to biweekly mortgage payments is that some lenders may charge fees to enroll in their biweekly payment plan. When it comes to fees, you should crunch the numbers to confirm you'll still get ahead financially by paying biweekly.

How does paying mortgage twice a month help?

The practice is called bi-weekly mortgage payments, a strategy where mortgage loan customers pay their mortgage loan every two weeks, instead of once a month. The idea is to chop down your mortgage payment more quickly, and in the process, lower the amount of interest you pay on your mortgage overall.

What happens if I split my mortgage payment into two payments?

“What you do is take the normal 30-year mortgage you have, and instead of making the monthly payment the way you normally do, you split it down the middle and pay half every two weeks. That means, if your mortgage payment is $1,500 a month, you will pay $750 every two weeks.