15-Year vs. 30-Year
Higher payment vs. much less interest
The choice between a 15-year and a 30-year mortgage is the largest single decision in the loan, and it is not simply about which one costs less. It is a trade between a lower required payment and a much lower total price.
Run both on the same loan
Enter $340,000 at 6.5% for 30 years and you get roughly $2,149 a month. Total interest over the full term comes to about $434,000, which is more than the house cost.
Now change the term to 15 years. Fifteen-year rates typically run half a point lower, so use 6% and the payment jumps to about $2,869.
Total interest on that version is roughly $176,000. You pay $720 more each month and save about $258,000 over the life of the loan.
Why the interest difference is so large
Interest accrues on the outstanding balance, so the faster the balance falls, the less there is to charge against.
On the 30-year loan you still owe more than half the original amount eighteen years in. On the 15-year loan you are below half in year eight.
The lower rate helps, but most of the saving comes from the time itself. Even at the same 6.5%, the 15-year term saves well over $240,000.
- 30-year at 6.5%: about $2,149 a month, roughly $434,000 in interest.
- 15-year at 6.0%: about $2,869 a month, roughly $176,000 in interest.
- 15-year rates usually sit 0.25 to 0.75 points below 30-year rates.
- The 30-year payment is a floor you can always exceed voluntarily.
- The 15-year payment is a commitment you cannot reduce later.
The flexibility argument for the longer term
A 30-year loan with voluntary extra payments can be paid off in fifteen years. A 15-year loan cannot be stretched back to thirty when you lose a job.
That asymmetry is the strongest case for the 30-year term. You keep the option to accelerate without locking yourself into a payment you must make in every economic condition.
The catch is honesty about whether you will actually send the extra. Most people who plan to pay a 30-year like a 15-year do not, which is the strongest case for the shorter term.
The thirty-year loan you pay like a fifteen
There is a middle option that gets overlooked: take the thirty-year term and voluntarily pay the fifteen-year amount each month.
You will pay slightly more interest than a true fifteen, because thirty-year rates are typically a bit higher, and you keep the ability to drop back to the lower required payment in a hard month.
Run both payments and compare. The extra cost of that flexibility is often smaller than people assume, measured against the option value of a lower floor.
The catch is discipline. The higher payment is voluntary, so it only works if you actually make it. A true fifteen-year loan removes the choice, which for some households is the point.
How to decide for your household
Compute both payments and compare each against your take-home pay. If the 15-year payment exceeds 28% of gross income, it is probably too tight regardless of the interest savings.
Consider what else the extra $720 a month could do. Put into a retirement account at 8% for fifteen years, it grows to a substantial sum, which weakens the pure-savings argument for the shorter term.
A reasonable middle path is a 30-year loan with an automatic extra principal payment. You get most of the interest savings and keep the escape hatch.
The 20-year term almost nobody mentions
Twenty-year mortgages exist and are widely available, and they sit in a useful place between the two standard options.
On $340,000 at 6.25%, a 20-year loan runs about $2,485 a month with roughly $256,000 of total interest. That is $336 more per month than the 30-year and saves around $178,000.
For households where the 15-year payment is genuinely out of reach but the 30-year feels wasteful, this is often the answer. It rarely appears in lender conversations unless you ask for it.
Try these inputs
- 30-year: $340,000, 6.5%, 30 years
- 15-year: $340,000, 6.0%, 15 years
- Same rate comparison: $340,000, 6.5%, 15 years