How does a 25-year mortgage compare to other amortization periods?
With an amortization period of 25- to 35- years, you can keep your monthly payments low, but you’ll pay more interest over the life of your mortgage. Depending on your APR, you can end up paying close to your initial principal in interest alone with a 25-year amortization period — though you’ll pay less than with a 30- or 35- year term. By shortening your term to 15- or 20- years, you’ll pay more monthly, but can save big in the long run when it comes to interest.
For a $200,000 mortgage at a fixed interest rate of 3%, you’d pay…
| Mortgage term | Monthly Payment | Total Interest Paid | Savings |
|---|---|---|---|
| 10 years | $1,929.50 | $31,540.01 | $16,747.81 |
| 15 years | $1,379.38 | $48,287.82 | $17,472.80 |
| 20 years | $1,107.34 | $65,760.62 | $18,186.68 |
| 25 years | $946.49 | $83,947.30 | $18,886.60 |
| 30 years | $841.21 | $102,833.90 | $19,569.88 |
| 35 years | $767.63 | $122,403.78 | – |
For example, on a 25-year mortgage of $200,000 at a fixed-rate of 3%, you’d pay approximately $946.49 monthly, and your total interest paid by the end of the mortgage would amount to around $83,947.30. In comparison, a 15-year mortgage would result in higher monthly payments of around $1,379.38, but a much lower total interest paid of $48,287.82. That’s almost half the interest.
A 30-year mortgage, on the other hand, would require a low monthly payment of $841.21, but would come with a much higher total interest paid of $102,833.90.