What is better for investors – a 15-year or 30 year mortgage?

15 year mortgages appear to save money over 30 year loans because of a lower interest rate. Personally, I would much rather the flexibility of a 30 year loan when buying investment properties. I prefer a 30 year loan because it allows me to get more cash flow from day one and gives me the flexibility I desire.

Some folks prefer 15 year loans because of lower interest rate and shorter time period. While it is true that the rate will be lower on a 15 year, the term does not bother me because you can pay off a 30 year loan early if you would like.

Folks like the compare how much you would pay on a 15 year mortgage compared to a 30 year note, however I prefer to compare monthly payment and what you are mandated to pay every month.

30 year mortgages are not that easy to obtain, especially when dealing with investment properties. If you can obtain a 30 year mortgage, you need to jump on that option as you always have the ability to pay the note early however you also have the flexibility to put more money away and use those funds for other purposes.

Another big factor is considering whether you can qualify to purchase more properties as banks will look at your debt to income ratio. A 15 year note has a higher payment and will therefore increase your monthly debt payments, the higher your loan payment the less cash flow you will have and the harder it will be to qualify for loans.

So, if you can get a 30 year mortgage on an investment property, please don’t think twice as your cash on cash return will be higher and it will give you the flexibility that is so very important.