Pros and Cons of a 15-year over a 30-year Mortgage.

The 30-year fixed-rate mortgage has been a stalwart of today’s real estate market for homeowners looking to refinance. Now it’s facing competition from the 15-year fixed-rate mortgage.

In August, the number of applications for 15-year refinancing loans submitted nationwide through the website was up 29 percent from August 2010, while 30-year refinancing loans saw a 12 percent increase.

“It’s all the trend right now. Most borrowers are asking about switching to a 15-year-loan. Everybody’s in a mood now to get those mortgages paid off. They want to see an end to those payments, and that’s what’s driving it,” said Kristine Marr, a senior loan officer with RPM Mortgage in Walnut Creek.

Such loans result in huge savings in terms of interest payments but require larger monthly payments than a 30-year loan.

In the past few weeks, there has been a big increase in homeowners who are looking to refinance into a 15-year-loan, said Kevin Conlon, senior vice president of operations at San Ramon, Calif.-based Mason-McDuffie Mortgage.

Retirement considerations play a role along with a desire to build equity faster.

Homeowners are thinking, “I really don’t want to restart the clock for 30 years if I’m retiring in 20 years,” he said.

The best candidates to consider these loans are homeowners who have paid down a 30-year mortgage for at least five years, have sufficient equity and excellent credit, are secure about their job future, and can handle the higher payments, say mortgage professionals.

“It can shave years off their mortgage,” Conlon said.

But not all borrowers are in a position to switch.


  • Own your home in half the time.
  • Builds equity faster while paying significantly less in interest.
  • Interest rates are typically 0.5 to 1 percentage points lower.


  • Monthly payments are higher.
  • The maximum mortgage interest tax deduction is less because the borrower is paying less interest over the life of the loan.
  • If the borrower becomes unemployed or if their income takes a dramatic hit because of a financial emergency, it will be harder to keep up with the payments.

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