Long story short- it doesn’t. Homebuyers often choose a 30 year loan because it creates a more feasible monthly payment.
The longer life of the loan, the smaller the monthly payments are. This protects borrowers from being obligated to pay large mortgage payments in situations where budgets may be tight.
That isn’t to say that you can’t pay off your mortgage faster, but rather under any circumstance – that is your base payment. The flexibility of lengthier loans are practically the only appeal to them.
30 year loans may feel nice on your pockets at a monthly rate, but it’s going to cost you at least tens of thousands of dollars just in interest payments. The length of the loan is meant to make homeownership achievable for Americans that aren’t particularly wealthy.
The standard mortgage payment is not meant to consume your life. Depending on your income, you can shorten the life of your loan by over-paying your monthly mortgage.
To some borrowers, life gets in the way and unexpected expenses or drops in income leave less room in their budgets for housing. The 30 year loan rate is meant to fall back on when or if you can’t prepay.
It is important to note that you can have a "15 year mortgage" and still fall back on the 30 year loan rate if circumstances change. Just because you want to pay off your loan in a shorter time frame, doesn't mean you have to commit to larger payments every month. 30 year mortgages are meant to be a baseline, and when your pockets are prosperous, you can aim towards a sooner pay-off.
Lower mortgage payments also allow room to save in other places. You can put more towards retirement or paying off student loans. Maybe you enjoy a morning Starbucks that you're not willing to part with or a large bucket list you're saving up for. Not everyone's top priority is mortgage payoff, and that is okay.
15 year loans are an option to borrowers that prefer to own their house sooner and have the privilege of a larger monthly budget. This is advantageous to people that already have savings for the future and are confident in their budgeting. It is not an option for every borrower and is something that needs to be discussed with your loan officer if you’re interested in a shorter loan life.