The chief concern for borrowers considering a 15 Year Mortgage is the higher monthly payment. Since the amortization period is shorter than a typical mortgage, 15 Year Home Loans usually have higher monthly payments. By contrast, a 30 Year Mortgage would likely have more affordable payments, since the amortization period is stretched out over a longer period of time.
A higher monthly mortgage payment may mean borrowers will have less “buying power”; in other words, they may have to lower their home buying budget and search for homes that are priced lower in order to keep their payments affordable.
For example, a 30 Year Mortgage on a $200,000 home (assuming a 3.95% interest rate and 20% down payment) would be around $760 per month, not including property taxes and homeowners insurance.
By contrast, a 15 Year Mortgage on the same home would likely have payments over $1,1000 per month. In order to keep monthly payments closer to the $700-$800 range, the home buyers would probably need to modify their home search to properties priced below $150,000.