Should You Get a 30-Year Mortgage? Here's What Warren Buffett Thinks

The investing giant has strong opinions about this popular loan product.

If you're looking to buy a home, chances are, you can't just purchase one outright. Rather, you may need to take out a mortgage to pay off your home over time.

When it comes to getting a home loan, you have choices. You could sign a fixed-rate loan -- one whose rate is guaranteed to stay the same for the entire repayment period -- or you could sign an adjustable-rate mortgage.

Within the realm of fixed loan products, there are different terms you can opt for. Most mortgage lenders offer 30-year loans, 20-year loans, and 15-year loans. Some lenders will even write a custom loan term, so if you want a 12-year mortgage or a 25-year mortgage, it's possible to get one.

But investing giant and billionaire Warren Buffett is a huge advocate of signing a 30-year mortgage. Here's why.

The upside of a 30-year loan

During a 2017 CNBC interview, Buffett called the 30-year mortgage "the best instrument in the world." And there are definite benefits to signing a 30-year loan.

For one thing, it can make homeownership more affordable. With a 30-year loan, you're paying off your home over a lengthy period of time, so your individual monthly payments will be lower than what you'll pay with a shorter-term loan. That could open the door to homeownership if you're on a budget and can't swing higher payments.

What’s more, with a 30-year mortgage, you always have the option to accelerate your repayment period and get your home paid off sooner. Doing so could also save you a fair amount of interest on your mortgage.

By contrast, if you sign a 15-year mortgage in the hopes of saving money on interest, you'll be locked into higher monthly payments. But you can actually sign a 30-year mortgage and treat it like a 15-year loan if your financial situation allows for that.

You can also refinance your mortgage

Another reason Buffett is a fan of the 30-year mortgage? If mortgage rates drop after you lock yours in, there's the option to refinance and snag a lower interest rate. Or, if your income situation changes and you're able to swing higher monthly payments, you can refinance a 30-year loan to a 15-year one.

Now, one danger in refinancing is resetting the clock on your mortgage. If you're 10 years into repaying a 30-year loan and you take out a new 30-year loan, you'll effectively end up taking 40 years to pay off your home. But in that case, you can always look at refinancing to a shorter loan term -- for example, to a 20-year mortgage.

Take Buffett's advice

Although Warren Buffett has enough wealth to buy countless homes outright, his points about the benefits of a 30-year mortgage are spot-on. This doesn't mean a 30-year loan is automatically the best borrowing choice for every buyer. But it pays to consider the advantages of going with a 30-year mortgage, especially if you're worried about swinging the monthly payments that would come with a shorter-term loan.