15-year mortgage may not be best fit for you

A robust rainy-day fund is essential and may be one reason to avoid a second mortgage. (Flickr photo by Only Fabrizio)

The allure of a 15-year mortgage is inescapable: As everyone knows, the cost is lower than it is for a 30-year loan over the life of the loan.

How many folks do you know have held a mortgage for 30 years or even 15 years?  Even 15 years is twice as long as most Americans waited before selling and buying a new place — until the housing bust descended and caused a drag on the market.

The Wall Street Journal has done the math:

Say you have a mortgage of $300,000, and your financing options are a 30-year mortgage at 3.75 percent or a 15-year at 3 percent.  The 15-year would cost you $683 more a month. . . but in five years, you’d save $14,735 in interest and have $55,679 more in equity.  By year 15, you’d have saved more than $68,000 in interest.

That’s all well in good, but