15-Year vs 30-Year Mortgage: A Real Numbers Comparison
The 30-year mortgage has a lower monthly payment. The 15-year mortgage can save you a quarter of a million dollars. Here is the same loan, both ways, with real numbers.
Choosing a mortgage term is one of the biggest financial decisions most people make, yet it is often reduced to a single question: "What monthly payment can I afford?" Affordability matters, but it hides the true cost of stretching a loan over three decades. In this comparison we run one identical loan through the standard mortgage formula — the same formula behind our Mortgage Calculator — as both a 30-year and a 15-year loan, and compare the payment, the total interest, and the trade-offs honestly. For background on the formula itself, see how mortgage payments are calculated.
The scenario
Imagine a $400,000 home with $80,000 down, leaving a loan of $320,000. For the 30-year loan we use a 6.5% rate, a realistic recent figure. Fifteen-year loans almost always carry lower rates than 30-year loans, so for the 15-year loan we use 5.75% — typically about three-quarters of a point lower. Both payments below are principal and interest only, before taxes and insurance.
The numbers, side by side
| 30-year mortgage | 15-year mortgage | |
|---|---|---|
| Loan amount | $320,000 | $320,000 |
| Interest rate | 6.5% | 5.75% |
| Monthly payment | $2,022.62 | $2,657.31 |
| Total payments | $728,142.36 | $478,316.21 |
| Total interest | $408,142.36 | $158,316.21 |
| Debt-free in | 30 years | 15 years |
The 15-year loan costs $634.69 more each month — a real and significant difference. In exchange, it saves $249,826.15 in interest. Read that again: on the same house and the same loan, the slower repayment costs an extra quarter of a million dollars, more than three-quarters of the amount originally borrowed.
Why the difference is so large
Two effects multiply together. First, the shorter term means interest is charged for half as many years. Second, a 15-year loan attacks the principal much faster: in the very first payment of the 15-year loan, about $1,124 goes to principal, compared with only about $289 in the first payment of the 30-year loan. A falling balance means less interest next month, which means even more of the following payment clears principal — a snowball the 30-year loan barely gets rolling in its first decade. The lower rate on 15-year loans adds a third, smaller saving on top.
The honest case for the 30-year mortgage
None of this makes the 30-year loan a foolish choice. The lower payment can be the difference between buying and not buying, or between a comfortable budget and a fragile one. A household that takes the 30-year loan and genuinely invests the $634.69 monthly difference could, over long periods, earn returns that rival the interest saved — though that requires discipline and involves market risk, while the 15-year loan's saving is guaranteed. The 30-year loan also keeps more cash liquid for emergencies, and its payment is easier to sustain if income drops. Flexibility has real value; it just should be chosen with open eyes about its price.
A middle path: 30-year loan, 15-year behaviour
There is a compromise many borrowers use. Take the 30-year loan for its flexibility, then voluntarily pay extra toward principal when times are good — even paying it as if it were a 15-year loan. Extra principal payments shorten the term and cut total interest dramatically, yet if money gets tight you can fall back to the lower required payment. The catch is discipline: the saving only appears if the extra payments actually happen, every month, for years. Our guide to compound interest shows the same mathematics working in your favour when you save instead of borrow.
Equity: the other gap that opens up
Interest is only half the story; the two loans also build ownership at very different speeds. After five years of payments, the 30-year borrower in our example still owes roughly $299,600 of the original $320,000 — five years of payments cleared only about $20,400 of principal, because the early payments were mostly interest. The 15-year borrower, after the same five years, owes roughly $242,100, having cleared about $77,900 of principal on top of enjoying the lower rate. After ten years the contrast sharpens: the 15-year loan is well over half repaid with about $138,300 outstanding, while the 30-year loan still has around $271,300 outstanding. That equity gap matters if you sell, refinance, or simply want the security of owing far less than your home is worth. It is another way of seeing the same truth: the 15-year mortgage is not just a shorter loan, it is a faster transfer of the home from the lender's balance sheet to yours.
Which one should you choose?
Choose the 15-year if the higher payment fits comfortably in your budget with room to spare, you plan to stay in the home, and you value being debt-free sooner and paying far less interest. Choose the 30-year if the 15-year payment would stretch you thin, your income is variable, or keeping cash available matters more than minimising interest. Either way, run your own figures — your price, your rate, your term — in our Mortgage Calculator before deciding. These figures are estimates for illustration and are not financial advice; a lender's offer will include taxes, insurance and fees that sit on top of the payments shown here.