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Last updated on December 26th, 2022 at 09:34 pm
Author at Compare Closing LLC
Amanda Byford has bought and sold many houses in the past fifteen years and is actively managing an income property portfolio consisting of multi-family properties. During the buying and selling of these properties, she has gone through several different mortgage loan transactions. This experience and knowledge have helped her develop an avenue to guide consumers to their best available option by comparing lenders through the Compare Closing business.
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You could get a 30-year loan, a 20-year loan, or a 15-year loan when you opt for a mortgage.
Even if a 15-year loan means quick payoff it would result in higher monthly payments. So if you’re on a tighter budget, you may choose between a 20 year vs 30 year mortgage.
Pros and Cons of a 20 year Mortgage
Taking out a 20-year mortgage has plenty of good reasons
- Compared to 15 years in a 20-year mortgage you will score a lower interest rate with a longer repayment period.
- Compared to a 30-year loan you’ll save money on lifetime interest because you’ll be paying it off in 10 fewer years, So you will save a lot of money on interest.
- Since you’ll pay off your home sooner, you will be freeing up money for other expenses or financial goals like to travel more or start a business.
The drawbacks to getting a 20-year mortgage are
- As you’ll spend more money each month on your mortgage payment, you will be cash-strapped. Other expenses like property taxes, insurance, and maintenance will also be included making it a bigger chunk to pay off.
- You’ll have less money left each month for retirement saving.
Pros and Cons of a 30 year Mortgage
Taking out a 30-year mortgage can work to your benefit
- You’ll spend less each month on your mortgage payment, so more money and less stress.
- You’ll free up money for other important goals and be able to meet other objectives without having to put them off.
The drawbacks to getting a 30-year loan are
- You’ll get stuck with a higher interest rate compared to what you’ll pay for a 20-year loan.
- In the course of repaying your home loan you’ll spend more money on mortgage interest.
- Paying off your home will take a longer time. Having that debt could be stressful.
When it comes to choosing between the 20- or 30-year mortgage, you need to figure out what’s right for you, Check the following:
- What is my budget to spend on housing?
- Am I stressed out with a limited cash flow?
- Can I manage my money?
If you find it hard to manage a 20-year mortgage, you can always refinance to a 30-year mortgage or vice versa or you can refinance to a shorter-term loan. As a mortgage borrower, you have different options.
