The answer in short – is never. At no time on a 15 year mortgage does the whole entire payment go solely to principle. Interest is paid right up through the loan payoff at 180 months. Unlike a 30 year mortgage, with amortization based on 360 month, a 15 year mortgage is based on amortization term of 180 months, so you are paying down the loan in half the amount of time on an accelerated amortization schedule. Because the loan is being paid down at a rapid speed, that it otherwise would normally take, the majority of the payment goes to principle in the first couple of years- so the total interest paid is compounded into 15 years rather than 30 years. Try our 15 year calculator.
The advantages of taking a 15 year mortgage include the following:
- lower rates than almost every other longer-term loan type including better than 20 year, 25 year and 30 year terms
- because the interest rates are lower, it’s also a lower-cost mortgage
- loan is paid off in half the normal amount of time
- majority of the payment goes to principle early on unlike a 30 year where the interest is the majority of the payment for the first 7 to 9 years
Disadvantages of a 15 year mortgage include the following:
- mortgage payment is nearly double that of a 30 year mortgage
- if the financial situation ever changes or cash flow becomes a burden making a 15 year payment can easily add insult to injury on the household cash flow
- you’ll need more income to offset the higher payment in qualifying for the mortgage. In fact for each dollar of extra mortgage payment – double dollar of debt in income will be needed to qualify
- loan is paid off faster eliminating the longer-term mortgage interest tax deduction
Want to explore the different loan terms for your particular situation? Begin your research by getting a real time 15 year mortgage rate quote now, it is free!