Assuming you take the standard deduction and cannot claim the interest deduction. As a general rule of thumb is one better than the other? Is it better to (assuming you live in an area with low cost of living) get a 15 year mortgage with $1000/month in payments or one with a 30 year and $700/month and invest the other $300? At 15 years, which one would you come out ahead with? Over 30 years, I assume you’d come out ahead with the 15 year mortgage since you’d have $1000/month to invest for 15 years (years 16-30).
Is paying off your mortgage early always the best financial decision?
Depends on the interest rates and how much you value the freedom of not having a mortgage during years 16-30 vs. having more liquid assets during years 1-15. Here is a calculator to do the math. The general advice people give is that the 30 year mortgage (plus investment) is better if you are disciplined, will invest wisely, and plan to stay in one place for the whole term. The benefits will likely not accrue into you are well into the middle of that 30 years.
You should definitely forego a 15-year loan if getting one means not having enough money to max out contributions to your 401(k), individual retirement account, 529 college-savings plan, and/or having a 6-month emergency fund. I personally would go for the 30 just because predicting that far in advance seems risky to me, so committing to a much larger mortgage payment means I am essentially investing in a singular, fixed and illiquid asset (at a relatively low rate) that might blowup if the neighborhood declines or the housing market collapses. Situations vary, but you can always split the difference by choosing the 30 and overpaying when you don’t see good investment opportunities.