The difference between a 15-year mortgage and a 30-year mortgage in Canada primarily lies in the term length, monthly payments, and the total interest paid over the life of the mortgage.
15-Year Mortgage:
- This option means larger monthly payments, but a lower rate and substantial savings on interest³.
- You’ll pay off your mortgage faster, which also reduces the amount of interest you pay¹².
- It allows you to own the home sooner and get rid of private mortgage insurance (PMI) sooner by reaching the 20% equity threshold faster².
30-Year Mortgage:
- This option gives you a more affordable monthly payment, but expect higher borrowing costs overall³.
- You will end up paying more in interest over the life of the loan compared to a shorter term³.
- Lower monthly payments typically mean it will take longer to build up equity in your home².
- It has higher interest rates (typically the longer the term, the higher the rate)².
In summary, while a 30-year mortgage can make your monthly payments more affordable, a 15-year mortgage generally costs less in the long run⁵. The choice between the two will depend on your financial situation and long-term goals. It’s always a good idea to consult with a financial advisor or mortgage specialist to understand what would work best for you.
