How can I reduce my home loan from 30 years to 15 years?

Is it cheaper to pay off a 30-year mortgage in 15 years?

If you are considering paying off your 30-year mortgage in 15 years, it is important to consider if there is a pre-payment penalty on your loan. While a lot of lenders do not penalize you for paying off your mortgage early, some do—so it is a good idea to call your lender specifically to ask about any potential pre-payment penalty.

Since they come with lower monthly payments and allow you to have more purchasing power, 30-year mortgages are usually the most popular choice for homebuyers. Fifteen-year mortgages, on the other hand, have advantages particularly when it comes to paying less interest in the long run. The difficulty for most homebuyers comes with the higher monthly payments.

If you do go with a 30-year mortgage, you can still make extra payments each year, either toward a faster overall payment plan or simply to make the extra payment if and when you do have the funds. In either case, the extra payments should help you save on interest, pay off the mortgage more quickly, and possibly provide you with the best of both worlds.

Can you pay a 30-year mortgage in 15 years?

Yes. In fact, a lot of people get a 30-year mortgage with the expectation that they will pay it off in 15 years. If you are able to pay off your 30-year mortgage in 15 years, it would also be cheaper, since you would potentially save yourself 15 years’ worth of interest payments. Opting for that route isn’t so different from choosing a 15-year mortgage in the first place, the only difference being choosing to make those added payments would be your choice entirely.

Of course, it is important to remember that paying a 30-year mortgage in 15 years is less common since financial obligations can arise at any time. You might decide you need a vacation instead of making the extra payments or that your kitchen could use an upgrade, as a couple of examples. For these reasons, rather than paying a 30-year mortgage in 15 years, it is sometimes a better idea to take out a 15-year mortgage from the start. The reason for that option is you will not be tempted to spend those funds on anything else—you will have built-in accountability to get your home paid off more quickly.