15-year vs 30-year
15-Year vs 30-Year Mortgage.
⚡
TL;DR
On a $400K loan: 15-year saves $312,283 in interest but costs $793 more per month. The 30-year wins for affordability and flexibility; the 15-year wins for wealth-building if you can afford the higher payment.
📊 Side-by-side
$400,000 loan, head-to-head.
15-year
$3,322
/month
Interest rate5.75%
Term15 years (180 months)
Total interest$197,895
Total paid$597,895
30-year
$2,528
/month
Interest rate6.5%
Term30 years (360 months)
Total interest$510,178
Total paid$910,178
💸 Extra monthly cost (15-year)
$793/mo
💰 Total interest saved (15-year)
$312,283
You pay $793/mo more on the 15-year. But you save $312,283 in total interest. Effective return on each extra dollar paid: ~13% guaranteed — better than the long-term stock market average.
🎯 Decision matrix
When each term wins.
✅ Pick 15-year if...
- →Dual-income household with stable W-2 income
- →Already maxing retirement contributions (401k, IRA)
- →Plan to stay in the home 10+ years
- →Want to be mortgage-free before retirement
- →Comfortable with 30-35% of income going to housing
- →Hate carrying debt psychologically
✅ Pick 30-year if...
- →First-time buyer maximizing affordability
- →Variable or commission-based income
- →Want flexibility for unexpected expenses
- →NOT yet maxing retirement contributions
- →Expect to sell or refinance within 7-10 years
- →Plan to invest the difference in equities
💡 The smart hybrid
The compromise most people miss.
Take a 30-year mortgage, then voluntarily make payments as if it were a 15-year. You get the best of both:
- →Pay off in roughly 15 years by adding $793/month extra principal
- →Cash-flow flexibility: in a job loss or medical emergency, drop back to the contractual 30-year payment
- →Slightly higher rate than a true 15-year (~50-75 bps), so total interest is slightly higher than pure 15-year
The math: same monthly payment as 15-year, slightly more total interest (~$30-50K extra on $400K loan), but with an option to pause the aggressive payoff anytime. Most disciplined borrowers prefer this structure.
❓ FAQ
Common questions.
Which is better: 15-year or 30-year mortgage?
Mathematically, the 15-year wins for total cost: lower rate, far less total interest, faster equity. The 30-year wins for monthly affordability and flexibility. The right answer depends on your cash flow: if you can comfortably afford the 15-year payment AND have already maxed retirement contributions, take the 15-year. Otherwise, take the 30-year and make occasional principal pre-payments.
How much money does a 15-year mortgage save?
On a $400,000 loan: 15-year at 5.75% costs $3,322/mo and $198,000 total interest. 30-year at 6.5% costs $2,528/mo and $510,000 total interest. The 15-year saves $312,000 in interest at the cost of $794/mo extra payment. Effective return on the extra payment: roughly 12-15% guaranteed.
Why is 15-year mortgage rate lower than 30-year?
Two reasons: (1) Shorter loans carry less duration risk for lenders — they price this in. (2) 15-year borrowers self-select for higher creditworthiness (they qualify for the higher payment), reducing default risk. The 50-75 basis point spread between 15 and 30-year is consistent across decades.
Can I refinance from 30-year to 15-year mortgage?
Yes, and many borrowers do this 5-10 years into a 30-year as their equity and income grow. The refinance restarts the clock but at a shorter term and typically lower rate. Compute the break-even on closing costs (typically 2-3 years) before deciding.
15-year mortgage vs invest the difference — what wins?
Historical math: investing the $794/mo difference in S&P 500 over 15 years at 7% real return = $241,000. The 15-year mortgage saves $312,000 in interest. The 15-year wins by ~$71,000, plus guaranteed return + lower stress. The "invest the difference" math only beats the mortgage when stocks return >10% real, which is above historical averages.
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