Out of all the mortgages out there, a 15-year mortgage will likely save you the most amount of interest. 15-year mortgage rates are almost always lower than 30-year fixed mortgage rates. Further, because the mortgage fully amortizes across a 15-year duration, you will likely pay off your mortgage sooner than if you had a 30-year amortizing mortgage.
Ever since I purchased my first property in San Francisco in 2003, I’ve actually preferred adjustable rate mortgages (ARMs). I preferred an ARM over a 30-year fixed mortgage because the interest rate was always lower. Further, given my consistent belief that we’d be in a permanently low interest rate environment, it didn’t make sense to borrow money on the long end of the curve.
In a permanently low interest rate environment, when an ARM resets, there’s a good chance it resets to a similar rate or even to a lower rate. Further, the average homeownership tenure was only about 7 years in 2003. Today, post-pandemic, the average homeownership tenure is closer to 10.5 years.
But even still, taking out a 30-year fixed rate mortgage makes no sense if you plan to sell your home after 10.5 years. Strategically, you want to match your fixed rate with your homeownership tenure to save the most amount of money.
But after so many years of taking out mortgages, refinancing them, and paying them off, a 15-year mortgage is probably the best mortgage to get, if you can afford it.