15 year VS 30 year Mortgage

4 Replies

When getting financing for a rental property how do you decide which mortgage option to go with?

Depends on your goals. If you plan to pay off your property more quickly, a 15 year note usually comes at a lower interest rate. If you want better cashflow typically a 30 year is better because it reduces the monthly payment giving a better COC return.

@Melba Chambers   Historically 15 year mortgages have lower interest rate than 30 year mortgages.  That has not been the case in this current interest rate environment.  I've seen 15 year rates higher than 30 year.  In that case, take the 30 year mortgage and pay additional principle with your monthly payment if you have the extra cash flow and want to pay the loan off sooner. 

Typically a 15 year mortgage will have a higher monthly payment than a 30 year. 

 Why not go for a 30 year and pay extra on it?  On my properties if I did 15 year my properties would have very little cash flow.  But I have the option to pay them down at a later date if I wanted to.  If you are at break even or very low cash flow all it takes is for one thing to go wrong and you are really in trouble.