As many homeowners are finding out, the terms of your mortgage can have a huge impact on your life. These past few years, people across the country delved into mortgages that they could not afford to pay. This has resulted in a crisis that has shaken the stock markets and forced well-intentioned people from their homes. Yes, choosing the right mortgage is a big deal.

One of the most important aspects of any home loan is the length in years of the loan. On typical mortgages, the payoff period is either 15 or 30 years. The most popular mortgage length is 30 years, which gives most homeowners ample time to pay off the loan. Comparing the shorter term of 15 years to the longer payoff period of 30 years will illustrate the benefits and potential pitfalls of each type of mortgage.

The typical 30-year mortgage is the most widely-used home loan instrument in America today. Millions of homeowners select the 30-year period to pay off their loans. The long, 30 year payoff means high interest payments over the life of the loan. With standard fixed-rate mortgages, the monthly interest payment is much higher than the principal payment in the first few years of the loan. As the loan nears payoff, the interest payments shrink, and most of the mortgage payment gets allocated to principal.

With a 15-year mortgage, monthly payments are much higher than with a 30-year loan. However, because the loan gets paid off quicker, the total interest paid over the life of the loan is much less. Borrower interest rates are also usually lower on 15-year mortgages than their 30-year counterparts. This means that the total interest on a 15-year mortgage is usually less than half of that on a mortgage that takes 30 years to pay off.

The benefits of the shorter loan are somewhat obvious. You build equity faster. You own your home outright in half the time. You don't pay as much interest.

With the 30-year mortgage, the benefits are also clear. You can take longer to pay off the loan, and use the money for other things. Also, you get to take your tax deduction on any interest paid for 30 years rather than 15.

One big factor in deciding which loan is right for any homeowner is knowing whether the higher payments can be made for 15 years. With the longer loan, a homeowner would have more flexibility to use their extra money however they wanted. With the higher mortgage payment, you lose that flexibility. Mortgage companies are very unforgiving when it comes to late payments. So, if there is any question about the ability to make the full payment on time every month, a borrower should probably choose the standard 30-year mortgage.

Another determining factor in choosing a mortgage term length is the interest rate of the loan, and being able to project what interest rates might do in the coming years. If current rates are low, and they are projected to rise over the next few years, it might make sense to take out a longer loan, and put the monthly savings into a high-interest bearing account. For example, if a person could get a home loan at 5%, and could subsequently get a 6% interest rate on savings, it would make sense to pay less on the mortgage, and put more into savings.

Conversely, if the interest rate on your mortgage is relatively high, it makes good sense to pay it off quickly. In that case, the 15-year term will be more profitable.

In summary, the comparison between 15 and 30-year mortgages comes down to monthly flexibility versus overall savings. Each potential homeowner should assess their particular situation to determine which loan is right for them.