Is it cheaper to pay off a 30-year mortgage in 15 years?
If you plan to pay off your 30-year mortgage in 15 years, it’s important to determine if there is a prepayment penalty on your loan. Although many lenders don’t penalize you for prepaying your mortgage, some do. So it’s a good idea to call your lender specifically to ask about any possible prepayment penalties.
Because they come with lower monthly payments and allow you to have more buying power, 30-year mortgages are generally the most popular choice for homebuyers. Fifteen-year mortgages, on the other hand, have advantages, especially when it comes to paying less interest in the long term. The difficulty for most home buyers comes from the higher monthly payments.
If you opt for a 30-year mortgage, you can still make additional payments each year, either towards a faster overall payment plan or just to make the extra payment if and when you have the funds. Either way, the extra payments should help you save on interest, pay off the mortgage faster, and eventually give you the best of both worlds.
Can you pay a 30 year mortgage in 15 years?
Yes. In fact, many people take out a 30-year mortgage with the expectation of paying it off in 15 years. If you are able to pay off your 30-year mortgage in 15 years, it would also be cheaper, since you could save yourself 15 years of interest payments. Going this route isn’t that different from choosing a 15-year mortgage in the first place, the only difference being choosing to make those extra payments would be entirely your choice.
Of course, it’s important to remember that paying off a 30-year mortgage in 15 years is less common since financial obligations can arise at any time. You might decide you need a vacation instead of making extra payments or that your kitchen could benefit from an upgrade, for example. For these reasons, rather than paying off a 30-year mortgage in 15 years, it is sometimes better to take out a 15-year mortgage up front. The reason for this option is that you won’t be tempted to spend those funds on anything else – you’ll have built-in liability to get your home paid off faster.