1. You will build equity in your house much faster, since each monthly payment has a larger percentage of your money going toward the principle.
2. You will own your house (FREE AND CLEAR) in 15 years. You'll be amazed at how quickly 15 years passes in your adult years.
3. You will save tens of thousands of dollars in interest on a 15 year mortgage compared to a 30 year mortgage. More about this in a minute.
4. Interest rates are typically .5% lower on a 15 year mortgage.
Take a moment to visit a mortgage calculator . Type in your own mortgage information (full amount of your loan and interest rate) using a 15 year time line and then do it again with a 30 year time line. Have the calculator figure out your amortization schedule and scroll down to the bottom to see how much interest you will have paid to your lender over the life of your loan. You'll see that even though your monthly house payment will go up a bit with the 15 year mortgage, you will save more than HALF of the interest $ you would have paid with a 30 year loan!
Here is an example:
30 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1097.75. During the 30 years that you pay on your loan, you will pay your lender $209,263.35 in INTEREST. (This means you will have paid way more than double the original price of your house). Ugh.
15 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1348.24. During the 15 years that you pay on your loan, you will pay your lender $92,683.63 in interest. So even though your monthly payment went up by $250.49, your overall savings on this loan is $116,579.72. Fantastic!
Yes, you can do this on your own by getting a 30 year mortgage (with the lower monthly payment), but paying at the 15 year payment rate. This plan gives you wiggle room if you ever hit some hard times and need a lower monthly payment to fall back on. Just make sure you're the kind of person who is very disciplined and will keep to the 15 year schedule.
Remember, housing is one place you want to be very, very careful with your money. Your ability to save yourself hundreds of thousands of dollars is very real. Take the time to do your homework -- and reap unbelievable rewards.