15 vs. 30 year mortgage calculator
By Allstate
Last updated: January 1
If you've been looking to purchase a home, you may have heard the term 15-year or 30-year mortgage. But you may be wondering what the difference is between them and which one is right for you. In short, these terms refer to the number of years you'll take to pay off your mortgage.
This mortgage calculator will help you understand the total cost and monthly payments for both 15 and 30-year fixed-rate mortgage loans. Loan terms don't have to be 15 or 30 years, but they're the two most popular fixed-rate mortgage terms, so they'll be your defaults. By entering the purchase price of the home, the down payment, term of your mortgage and other expenses, this tool can help you understand the advantages or disadvantages of each mortgage term and help you determine which loan is right for you.
Mortgage interest calculator terms you need to know
Here are some terms used in the 15 versus 30-year mortgage calculator that you may want to become more familiar with.
Purchase price
The purchase price refers to the price of the home that you're looking to finance.
Down payment
The down payment is a percentage of the purchase price of the home you're looking to finance. Down payments can range from as low as 1% to as much as 20% of the total purchase price. The down payment influences how much you'll need to borrow, how much interest you'll pay, and whether you'll need private mortgage insurance, according to Bank of America.
Term
The term of your mortgage refers to the length of time you'll take to pay your loan amount in full. This 15-year and 30-year mortgage calculator will allow you to compare both loan durations to see the difference in the total interest you'll pay.
Interest rate
The interest rate is the amount of interest that accrues over a given period on the loan. This period can be different depending on the structure of your loan. To get a better understanding of how interest is calculated, you can use a mortgage interest calculator.
Property tax
The property taxes are levied by certain jurisdictions on a property, based on its assessed value.
Homeowners insurance
Homeowners insurance can help you pay to repair damage caused by certain risks or perils. Coverage can change based on location, but typically things like theft and various weather events are covered by a homeowners insurance policy. It's required by lenders when you purchase your home, according to the Insurance Information Institute (III).
Monthly HOA fee
The home you purchase may require that you belong to a homeowners association. These associations can have monthly fees or dues that will add to your monthly housing costs, according to Freddie Mac.
What is a 15-year mortgage?
As the name implies, a 15-year mortgage is designed to be paid back in 15 years. Due to the shorter term of the mortgage, you'll pay less interest over the life of the loan. But according to Rocket Mortgage, since the loan is paid back over a shorter period, typically the monthly payments will be higher.
What is a 30-year mortgage?
A 30-year mortgage is a home loan that you pay back in 30 years. It's the most popular type of mortgage, according to Rocket Mortgage. Given that these mortgages last for a longer term than a 15-year mortgage, you'll likely pay more interest in exchange for lower monthly payments.
How to get a 15-year or 30-year mortgage?
If you are in the market for a home, you may be wondering how the process of getting a 15-year or 30-year mortgage may work. The exact process can vary depending on your circumstances but generally it will consist of four steps.
Researching lenders
A 30-year mortgage is a home loan that you pay back in 30 years. It's the most popular type of mortgage, according to Rocket Mortgage. Given that these mortgages last for a longer term than a 15-year mortgage, you'll likely pay more interest in exchange for lower monthly payments.
Preparing your finances
After you've found a lender, you'll need to gather your financial information to get pre-approval for your 15-year or 30-year mortgage. You'll need to provide things like:
- Your credit score and history
- Proof of your income
- Your job history
- Your assets
- Debt-to-income ratio
Applying for a 15-year mortgage
With your financial information in order, you'll now be ready to apply for pre-approval for through your chosen lender. Once you've provided your financials, they will assess if they are willing to extend you a loan, and the amount of the loan they would be comfortable with.
Closing the deal
Once you make an offer on a home, you'll need to finalize the terms of your mortgage. An underwriter will look at your assets and finances and ask you to provide documentation of the information you submitted when you applied for pre-approval.
Your lender will then verify your property details, typically by ordering an appraisal and conducting any required inspections, explains Rocket Mortgage. You will then receive closing documents that explain all the stipulations of your loan. After approval, you will sign your agreement, making you an official homeowner.
Mortgage FAQs
The principal difference is the term of the loan agreement. One is designed to last 15 years and the other 30 years.
Due to this difference, 15-year mortgages typically accrue less interest over the term of the loan than 30-year mortgages, which can save you a substantial amount of money. The tradeoff is that 15-year mortgages typically come with higher monthly payments.
The amount of money you can save in interest payments by choosing a 15-year mortgage will come down to the specifics of your loan. You can use our 15 and 30-year mortgage calculator to help you forecast a specific number.
15-year mortgages may be a good choice for people who can afford a higher monthly mortgage payment in exchange for paying less interest in total. This is not exclusive to people with high incomes and excellent credit, but it may help with securing approval for the loan.
The qualification process for acquiring a 15-year or 30-year mortgage requires assembling your financial documentation to send to your potential lender. These documents should include: your credit score, proof of income, debt-to-income ratio, and your current assets.
If you hold a mortgage of any term length, you may qualify for a home mortgage interest deduction, according to the IRS. This allows homeowners to deduct their mortgage interest on their yearly taxes.
You can apply for a mortgage to finance a home or property beyond the first one. Typically, lenders will look for a higher credit score for a second mortgage. Your second mortgage may also come with a higher interest rate than the first mortgage according to Chase.