Fix Your Finances 2.0: 15-year vs. 30-year mortgage  

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INDIANAPOLIS, Ind.- What’s the main difference between a 15-year mortgage and 30-year mortgage?

Financial experts say it’s potentially thousands of dollars in savings!

“A $250,000 30 year mortgage will cost you over $100,000 more on the life of a loan than a 15 year mortgage,” said Peter Dunn a local financial planner.

The downside of a 15-year mortgage is that your monthly payment is significantly higher than if you were paying the loan back over 30 years.

Here’s how it breaks down:

30-Year Mortgage Estimate

Loan Amount: $200K

Interest Rate: 4%

Monthly Payment: $954

15-Year Mortgage Estimate

Loan Amount: $200,000

Interest Rate: 3.25%

Monthly Payment: $1,405

If you don’t plan on staying in a house you’re buying for more than five years, a 15-year mortgage may be your best bet.

“If you can’t afford the 15 year mortgage for that same house, I would argue you can’t actually afford that house,” said Dunn.

The shorter pay back also means you build equity quicker.

On a 30-year mortgage the majority of your payments the first year go towards interest.

“So essentially, you’re renting from the bank,” said Dunn.