15-Year vs 30-Year Mortgage

15-year vs 30-year: the short answer

On a $400,000 loan at 6.5%, the 15-year costs $3,484.43 a month and $227,197 of lifetime interest. The 30-year costs $2,528.27 a month and $510,178 of interest. That is $956.16 more every month for 15 years in exchange for $282,981 less interest and a debt that is gone at payment 180 instead of payment 360.

Take the 15-year if you can carry that payment through a job loss, a transmission rebuild, and a bad year without flinching. The saving is guaranteed and it compounds for 180 months. Take the 30-year if the higher payment leaves no margin, because a payment you cannot hold ends in a forced sale or a refinance at the worst possible moment.

Most buyers miss the middle path. Borrow the 30-year at $2,528.27 and send the 15-year payment of $3,484.43 anyway. At the same 6.5% rate that retires the loan in exactly 180 months with the same $227,197 of interest, while the lower required payment stays in your pocket as insurance. The 30-year is an option on the 15-year, and the 15-year is not an option on the 30-year.

What is a 15-year mortgage? What is a 30-year mortgage?

Both are fixed-rate amortizing loans. You borrow a lump sum, you make the same payment every month, and each payment covers that month's interest first and reduces the balance with what is left. The only variable is how many payments the lender schedules: 180 on a 15-year, 360 on a 30-year. There is no adjustment date to watch, no cap to monitor, and no balloon at the end. The final payment retires the last dollar.

A 15-year mortgage spreads the payoff across 180 payments. Because the balance is outstanding for half as long, the lender collects interest for fewer months and prices the loan lower: 15-year rates usually run 0.50% to 0.75% below the 30-year on the same day. The payment is roughly 38% higher. Principal also moves faster: on the $400,000 example, the first payment splits $2,166.67 to interest and $1,317.76 to principal, so 37.8% of payment one retires debt. Equity after five years is $93,132.

A 30-year mortgage spreads the same payoff across 360 payments, which is what makes the payment low enough for most buyers to qualify. The trade is duration: the balance stays high, so interest accrues on more of it for more months. On that same first payment, $2,166.67 goes to interest and only $361.61 to principal, 14.3% of the check. Equity after five years is $25,556, less than a third of the 15-year figure. Total interest on the 30-year is $510,178 against $227,197 on the 15-year at the identical rate.

The structural difference matters more than the headline rate. A 15-year is a commitment to a payment; a 30-year is a commitment to a maximum. Neither is a better product. One of them is a better fit for your balance sheet, and the rest of this page works out which, with the arithmetic shown step by step. Run both terms against your own numbers in the 15-year mortgage calculator and the 30-year mortgage calculator.

Side-by-side comparison

Same loan, same rate, two terms. Every figure below is principal and interest at 6.5% on $400,000 with 20% down on a $500,000 home; taxes, insurance, and HOA dues are excluded because they do not change with the term.

The qualification row is the one that decides most files. At a 28% front-end guideline the 15-year needs $12,444 of gross monthly income and the 30-year needs $9,030, a $3,414 monthly gap. At a 36% back-end ratio on the same loan the numbers are $9,679 and $7,023. If your income does not clear the higher figure, the 15-year is not a cheaper loan to you, it is an unavailable one. Model both with the debt-to-income calculator.

Where each term wins

When a 15-year is the better choice

• Your payment is already covered by one income. If a single salary supports $3,484 plus taxes and insurance and still leaves a month of expenses unspent, the discipline costs you nothing and returns $282,981.
• You are within 10 years of retirement. Retiring with zero mortgage payment beats retiring with 20 payments left. The 15-year finishes inside the window; the 30-year at the same start date runs past it.
• You cannot credibly beat 6.5% after tax. Extra principal earns a guaranteed, non-taxable return equal to your rate. Paying off a 6.5% loan is a 6.5% cash yield, and few savings accounts or bond funds offer that.
• You want to force the savings. The higher payment is a standing instruction. Borrowers who "invest the difference" on paper usually spend it in practice; the 15-year collects it whether you are disciplined or not.
• You plan to keep the house for the full term. The interest saving accumulates in the back half. Sell at year 7 and the two terms are much closer than the lifetime figures suggest.

When a 30-year is the better choice

• The 15-year payment would exceed 28% of gross income. On $9,000 of gross monthly income the 15-year alone is 38.7% before taxes and insurance. That file qualifies on the 30-year and does not qualify on the 15-year.
• Your income is variable or commission-based. A gap of $956.16 a month has to be funded from reserves in a slow quarter. The 30-year keeps the required outlay low enough to ride out a lean stretch.
• You still carry higher-interest debt. A 22% credit card outranks a 6.5% mortgage every time. The 30-year frees the $956.16 to attack the card first, then to move to principal later.
• You are buying your first home and expect moves. Most first purchases last five to seven years, and the term difference is concentrated in payments you will never make. Keep the cash and the flexibility.
• You want the option to overpay. Extra principal on a 30-year reproduces the 15-year result exactly: pay $3,484.43 against the $2,528.27 obligation and the loan ends at payment 180 with $227,197 of interest. Missing a payment is allowed. Missing a 15-year payment is a default.

Cost comparison with real numbers

The payment comes from one formula: M = P × [ i (1 + i)ⁿ ] ÷ [ (1 + i)ⁿ − 1 ], where P is the loan amount, i is the annual rate divided by 12, and n is the number of payments.

30-year: i = 6.5% ÷ 12 = 0.005416667, n = 360, and (1 + i)³⁶⁰ = 6.9917980. So 400,000 × 0.005416667 × 6.9917980 = 15,148.90, and 6.9917980 − 1 = 5.9917980. M = 15,148.90 ÷ 5.9917980 = $2,528.27. Multiply by 360 and you repay $910,178, so interest is $910,178 − $400,000 = $510,178.

15-year: same i, n = 180, and (1 + i)¹⁸⁰ = 2.6442008. So 400,000 × 0.005416667 × 2.6442008 = 5,729.10, and 2.6442008 − 1 = 1.6442008. M = 5,729.10 ÷ 1.6442008 = $3,484.43. Multiply by 180 and you repay $627,197, so interest is $627,197 − $400,000 = $227,197.

The difference is $3,484.43 − $2,528.27 = $956.16 a month, and $510,178 − $227,197 = $282,981 of interest. Notice the same interest charge of $2,166.67 on payment 1 for both loans: $400,000 × 6.5% ÷ 12 does not know the term. What differs is the principal that follows it, $1,317.76 on the 15-year versus $361.61 on the 30-year, and that single line is what compounds into $282,981.

Second observation: a lender rarely quotes the same rate for both terms. Take the 15-year at 5.90% instead of 6.50% and the payment falls to $3,353.86 with lifetime interest of $203,694, a saving of $306,484 against the 30-year at 6.50%. The table below shows what each term has actually cost after 7 and 10 years, which is the horizon where most people refinance or sell.

Read the interest row, not the payment row. After seven years the 15-year borrower has sent $80,317 more out the door and still has paid $21,048 less interest. After ten years the interest lead is $46,281 while the balance is $161,020 lower. The crossover where the 15-year has also repaid more total dollars arrives between year five and year seven. Use the 15-year calculator for your own loan amount and the amortization guide for the month-by-month mechanics.

Eligibility and requirements

The credit and documentation requirements are essentially the same for both terms. What changes is how much of your income the payment consumes.

• Credit score: 620 is the conventional floor for either term; pricing tiers improve at 680 and reach their best level at 740 and above. FHA will accept 580 with 3.5% down on either term.
• Down payment: identical by program. 3% on conventional first-time buyer programs, 5% is the practical conventional minimum, 3.5% on FHA, 0% on VA. The term does not change the cash requirement.
• Debt-to-income ratio: lenders target 28% front-end and 36% back-end and will approve up to 43% to 45% with compensating factors. The 15-year payment of $3,484.43 is 29.0% of $12,000 gross income on its own, before taxes and insurance.
• Reserves: two to six months of the loan payment left after closing. On the 15-year example that is $20,907 to $62,720; on the 30-year it is $15,170 to $45,509.
• Mortgage insurance: identical. PMI applies below 20% down, can be requested off at 80% loan-to-value, and ends automatically at 78% of the original purchase price. The 30-year simply reaches those thresholds later because principal falls slower.
• Loan limits: identical. The 2026 conforming limit is $832,750 for a single-family home and $1,249,125 in high-cost areas, and the term is irrelevant to the ceiling.
• Rate spread: the only structural pricing difference. Expect the 15-year to be quoted 0.50% to 0.75% below the 30-year, which is worth roughly $130 to $160 a month on $400,000. Check the day's numbers on the rates page.

Mistakes people make when choosing a term

• Judging the term on lifetime interest alone. "$282,981 of interest" is accurate and it is not a reason to sign a payment you cannot hold. Total cost and monthly survival are separate questions, and the second one is decided first.
• Comparing the terms at different rates you invented. Quoting the 15-year at 5.90% and the 30-year at 6.50% is fair when both are real same-day quotes. It is not fair if you assumed the spread. Get both numbers on the same day from the same lender, or run both at 6.5% as this page does.
• Treating the 30-year as a 30-year promise. It is a 30-year ceiling. Borrowers who commit the 15-year payment against it pay the loan off in 180 months with the same interest, and who keep the difference in lean months buy themselves an option the 15-year does not have.
• Forgetting that the payment excludes taxes and insurance. The 15-year P&I of $3,484.43 becomes roughly $4,100 with $450 of tax and $167 of insurance. Add the figure you actually escrow before you decide what you can carry.
• Assuming extra payments happen. The 15-year makes them mandatory. Voluntary extra principal on a 30-year produced a median outcome far short of the schedule in most behavioral studies, so only plan on the extra if you would automate it the day after closing.
• Picking the 15-year before building reserves. Funding a 15-year until the checking account hits zero converts an interest-rate decision into an emergency. Two to six months of payments in cash comes first; the term choice comes after.
• Ignoring the refinance cost of changing your mind. Switching a 30-year into a 15-year later requires a new loan at 2% to 5% closing costs, $8,000 to $20,000 on $400,000, plus a new rate. If you already know you want the 15-year, take it at closing.

Frequently asked questions

Is a 15-year mortgage always better financially? No. On a $400,000 loan at 6.5% it saves $282,981 of interest, but it requires $3,484.43 a month instead of $2,528.27 and $12,444 of gross monthly income instead of $9,030 at a 28% housing ratio. If that payment puts your budget within one bad month of trouble, the 30-year costs less than a forced sale.

Can I refinance from a 30-year to a 15-year later? Yes. Most mortgages carry no prepayment penalty, and borrowers commonly do it after five to seven years of income growth or equity gains. Budget 2% to 5% of the balance in closing costs, $8,000 to $20,000 on $400,000, and check the break-even in the refinance calculator.

Are 15-year rates really lower? Typically 0.50% to 0.75% below the 30-year on the same day. At 5.90% instead of 6.50% on $400,000, the payment falls from $3,484.43 to $3,353.86 and lifetime interest drops from $227,197 to $203,694, a combined edge of about $306,484.

What if I take the 30-year and pay extra every month? Pay $3,484.43 against the $2,528.27 obligation and the loan retires at payment 180 with $227,197 of interest, mathematically identical to the 15-year at the same rate. Paying only $200 extra instead finishes at payment 293 with $398,286 of interest, still $111,892 saved.

What about a 20-year mortgage? It sits between the two: $2,982.29 a month at 6.5%, $315,750 of lifetime interest, and 240 payments. You give up $454.02 a month against the 30-year to save $194,428 and finish five years earlier.

How long does it take the 15-year to build the same equity as the 30-year? After five years the 15-year has repaid $93,132 of principal and the 30-year $25,556. The 30-year does not reach $93,132 of principal until roughly year 14, so the 15-year buys about nine years of equity head start.

Does the term change my mortgage insurance? The rules are identical: PMI below 20% down, removable by request at 80% loan-to-value and automatically at 78% of the original price. But the 30-year's slower amortization delays the day your balance crosses those lines, so on a 5%-down purchase the 15-year typically reaches 80% several years sooner.

Which term do lenders prefer to see? Neither affects approval beyond the payment itself. Underwriting runs the payment through your debt-to-income ratio, and the 15-year of $3,484.43 against $12,000 of gross income is 29.0% front-end on its own, while the 30-year's $2,528.27 is 21.1%. The 30-year qualifies more files; the 15-year repays them faster.