A 15-year mortgage saves far more interest, about $261,000 on a $320,000 loan in our example, but the payment runs roughly 30% higher. Pick it only if the payment fits under about 28% of gross income with savings intact. Otherwise take the 30-year and pay extra.
Danny and his wife are about to buy a $400,000 house with 20% down. The loan officer slides two options across the desk. A 30-year loan at $2,076 a month, or a 15-year loan at $2,700. Same house, same loan, $625 a month apart. One of those choices costs about $261,000 more in interest. The other one might leave them stretched every month for 15 years.
There’s no single right answer to 15 year vs 30 year mortgage. But there is a right answer for your budget, and the math makes it pretty clear once you lay it out.
How the two loans differ
Both loans are fixed-rate and fully amortizing: you pay the same principal and interest every month until the balance hits zero. The differences come from two things.
- Time. Paying the loan off in 180 payments instead of 360 means each payment carries much more principal.
- Rate. Lenders usually price 15-year loans lower than 30-year loans, often by around half a percentage point or more, because they get their money back sooner. The exact gap changes with the market, so get real quotes for both.
Shorter term plus lower rate is why the interest gap is so large. And it’s why the payment gap is smaller than most people expect. The 15-year payment isn’t double the 30-year payment. It’s about 30% higher.
Worked example: Danny’s $320,000 loan
Danny’s numbers, run through the mortgage calculator. The rates here are example rates; plug in your own quotes.
- Home price: $400,000, 20% down, loan of $320,000
- 30-year fixed at 6.75%
- 15-year fixed at 6.00%
- Property tax 1.1% of the price a year ($367 a month), insurance $1,800 a year ($150 a month)
| 30-year at 6.75% | 15-year at 6.00% | |
|---|---|---|
| Principal and interest | $2,076 | $2,700 |
| Total with tax and insurance | $2,592 | $3,217 |
| Total interest over the loan | $427,185 | $166,062 |
| Balance after 5 years | $300,402 | $243,229 |
| Balance after 10 years | $272,963 | $139,677 |
| Balance after 15 years | $234,545 | $0 |
Step by step:
- The 15-year payment is $2,700 minus $2,076, or $625 a month more.
- The 30-year loan costs $427,185 minus $166,062, or $261,123 more in interest.
- After 5 years on the 30-year loan, Danny has paid off less than $20,000 of principal. On the 15-year loan he has paid off almost $77,000.
- At year 15, one version of Danny owns his house outright. The other still owes $234,545, more than 73% of what he borrowed.
That last line is the one that changes people’s minds. Most of the early payments on a 30-year loan go to interest. The balance barely moves for the first decade.
But can Danny afford the 15-year payment?
Danny and his wife earn $115,000 a year together, about $9,583 a month before taxes. A common rule of thumb says housing costs should stay under 28% of gross income. That’s about $2,683 a month for them.
- 30-year total payment: $2,592, about 27% of gross. Inside the guideline.
- 15-year total payment: $3,217, about 34% of gross. Well over it.
The 15-year loan saves a fortune on paper. For Danny’s household, it also means less room for retirement savings, the emergency fund and life in general. That trade-off is the whole decision. If you haven’t set your comfortable housing budget yet, start with our guide to how much house you can afford.
Run your own numbers:
Run it twice: once with the 30-year term and your 30-year quote, once with the 15-year term and your 15-year quote. Compare the monthly payment and the total interest line.
The middle option most people skip
You don’t have to choose between “15-year payment forever” and “30-year payment forever.” You can take the 30-year loan and pay extra toward principal when you can. Same $320,000 loan at 6.75%:
| Plan | Monthly payment | Paid off in | Total interest |
|---|---|---|---|
| 30-year, minimum payment | $2,076 | 30 years | $427,185 |
| 30-year + $200 extra | $2,276 | About 23 years 4 months | $315,107 |
| 30-year + $300 extra | $2,376 | About 21 years 1 month | $280,400 |
| 30-year + $500 extra | $2,576 | About 17 years 10 months | $231,115 |
| 30-year, paying the 15-year amount | $2,700 | About 16 years 4 months | $208,762 |
| 15-year at 6.00% | $2,700 | 15 years | $166,062 |
Notice the last two rows. Paying $2,700 a month on the 30-year loan still costs about $42,700 more than the actual 15-year loan, because the rate is higher. That’s the price of flexibility. In exchange, if Danny loses a job or has a bad year, he can drop back to $2,076 without calling anyone.
The catch is the same as with any plan that depends on willpower. Extra payments only happen if you make them. Set them up as an automatic recurring payment, and confirm with your servicer that extra money goes to principal. Most standard mortgages today don’t charge a prepayment penalty, but check your loan documents.
What about investing the difference instead?
The classic argument for the 30-year loan: take the lower payment and invest the $625 a month. Over decades, the stock market has often returned more than mortgage rates, so the investor might come out ahead.
Here’s a fair test. Both versions of Danny spend exactly $2,700 a month for 30 years.
- 15-year Danny pays $2,700 on the mortgage for 15 years, then invests $2,700 a month for the next 15.
- 30-year Danny pays $2,076 on the mortgage for 30 years and invests the $625 difference the whole time.
At year 30, both own the house free and clear. Here’s what each has invested, at three example returns:
| Yearly return (example) | 15-year Danny | 30-year Danny |
|---|---|---|
| 4% | $660,658 | $428,176 |
| 6% | $774,760 | $608,903 |
| 8% | $911,652 | $880,102 |
At these rates, the 15-year loan comes out ahead even with an 8% return. Why? The 30-year loan charges 6.75% for 30 years, and returns have to clear that cost before the investor gets anything extra. When mortgage rates are low, say 3%, investing the difference has a much better shot. When rates are near 7%, paying the mortgage off is a solid, guaranteed return.
Two honest caveats. Market returns aren’t guaranteed in any year, and 30-year Danny does have something 15-year Danny doesn’t: a pile of accessible money for the first 15 years instead of cash locked up in house equity. If an emergency hits in year 8, the investor can sell investments. The 15-year owner would need to borrow against the house or sell it.
Who should pick which
The 15-year mortgage fits if
- The full payment stays comfortably inside your housing budget.
- You already have 3 to 6 months of expenses in an emergency fund.
- You’re already getting your full 401(k) match and saving steadily for retirement.
- Your income is stable.
- You want the house paid off by a specific date, like before retirement or before kids hit college.
The 30-year mortgage fits if
- The 15-year payment would push you past a comfortable budget.
- Your emergency fund is thin or you carry high-interest debt.
- Your income is variable: commission, gig work, seasonal.
- You’d rather keep the option to pay extra than the obligation to.
If you’re in between, the 30-year loan with an automatic extra payment is often the best of both. You get most of the interest savings when times are good and a lower required payment when they aren’t. And if rates drop later, refinancing into a shorter term is another way to get there.
Common mistakes
- Comparing at the same rate. Get a separate quote for each term. The 15-year rate is usually lower, and that matters.
- Choosing the 15-year loan, then skipping retirement savings to afford it. Giving up a 401(k) match to pay down a mortgage faster is usually a bad trade.
- Buying more house because the 30-year payment makes it look affordable. The longer term should give you breathing room, not a bigger house.
- Paying extra with no emergency fund. Money paid into the house is hard to get back out quickly.
What to do this week
- Ask your lender for a 15-year and a 30-year quote on the same day, same loan amount.
- Run both through the calculator and write down the payment and the total interest for each.
- Divide each total payment by your gross monthly income. Under 28% is the usual guideline.
- Check your emergency fund and 401(k) match. If either is missing, lean 30-year for now.
- If you choose the 30-year, pick an extra principal amount you can sustain and automate it from the first payment.
One money decision, one number worth knowing, one mindset shift. Free, every week.
Frequently asked questions
How much does a 15-year mortgage save compared to a 30-year?
On a $320,000 loan at 6.00% for 15 years vs 6.75% for 30 years, the 15-year loan saves about $261,000 in interest. The payment is about $625 a month higher.
Is it better to get a 30-year mortgage and pay it off early?
It’s more flexible but usually costs more, because the 30-year rate is higher. In the example above, paying the 15-year amount on a 30-year loan costs about $42,700 more in interest than the real 15-year loan. You’re paying for the option to lower your payment in a tough month.
Why are 15-year mortgage rates lower?
The lender gets repaid in half the time, so there’s less risk from rising rates and changes in your finances. The gap varies with the market, so compare live quotes.
Can I switch from a 30-year to a 15-year later?
Only by refinancing, which means new closing costs. Paying extra on your 30-year loan gets you most of the way without a new loan.
Keep reading
- How Much House Can You Really Afford? The Complete Guide
- Should I Refinance My Mortgage? When It Makes Sense
- Rent vs. Buy: How to Decide With Real Numbers
- Compound Interest Explained Simply
Education, not financial advice. The numbers here are examples; talk to a licensed professional about your own situation. Some links may be sponsored or affiliate links; see our disclosure.
