How does a 15-year mortgage compare to other amortization periods?
As you may have guessed, 15-year mortgages are paid off in 15 years — just over half the time of the most common 25-year mortgage. While a 15-year amortization period is not the most popular option, it’s viewed very positively because homeowners will own their home much faster and pay much less in interest over the life of the mortgage.
But the trade-off for lower interest and a quicker payoff period is higher monthly payments. Let’s say you’re looking at a $200,000 15-year fixed-rate mortgage with an interest rate of 3%. You’ll pay approximately $1,379.38 in mortgage payments each month and a total of $48,287.82 in interest over the life of the mortgage.
If you compare this with a 25-year fixed rate mortgage at 3%, you might pay approximately $946.49 per month in payments, but a staggering $83,947.30 in interest over time – and this doesn’t even include the closing costs and ongoing expenses like condo fees, utilities and maintenance fees, home insurance and mortgage insurance (if you put down less than 20%).
For a $200,000 mortgage …
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