15 Year vs 30 Year Mortgage

The term you choose changes the cost of your home more than almost any negotiation you will ever do on its price. The comparison below uses one loan, $300,000 at 6.5%, across both terms, so every difference you see comes from the term alone. In reality 15 year loans usually price below 30 year loans, which makes the short term look even better than these numbers show.

The Core Numbers

• 30 year term: $1,896 per month, $382,633 total interest.
• 15 year term: $2,613 per month, $170,398 total interest.
• The trade: $717 more per month buys $212,235 less interest and a home owned outright 15 years sooner.

Why so dramatic? Amortization. Interest is charged on the outstanding balance, and the 15 year loan attacks the balance from the first payment, so every subsequent interest charge is computed on a smaller number. The 30 year loan spends nearly two decades in its interest heavy phase; the 15 year loan barely has one. The mechanics are laid out in our guide to loan amortization.

The Case for Each

The 15 year term wins on pure cost, forces equity building like a savings plan you cannot skip, and typically carries a lower rate on top. It suits stable incomes with room to spare after savings goals are met.

The 30 year term wins on flexibility. The lower required payment is easier to carry through job changes, children, and emergencies, and the difference can be invested. At long horizons, diversified investments have historically returned more than typical mortgage rates, though with real risk and no guarantee. Our investment calculator shows what $717 per month compounds into at any return you consider realistic. The honest caveat: this strategy only works if the difference is actually invested, every month, for decades. Spent, it is just a more expensive house.

The Hybrid: A 30 Year Loan Paid Like a 15

Take the 30 year loan, then voluntarily pay the 15 year amount. At the same rate, the loan pays off in exactly 180 months with the same $170,398 interest as the true 15 year loan, and the required payment underneath remains $1,896. If a rough year arrives, you drop back to the required payment with no penalty, no refinance, and no conversation with the bank.

What you give up is the lower rate a genuine 15 year loan would carry, which is the price of the flexibility. For most borrowers who value optionality, that is a fair price. Model your own version with the amortization calculator and its extra payment inputs, or read how extra payments reduce interest for the mechanics.

How to Decide

Fund the boring things first: emergency reserve, any employer retirement match, high interest debt. If the 15 year payment fits comfortably after all of that, it is the cheapest path to owning your home. If it would squeeze those priorities, take the 30 year term, and decide deliberately whether the difference gets invested or prepaid. The only losing move is the default one: taking the 30 year term because the payment is smaller and letting the difference evaporate.