15 vs 30 Year Mortgage: Which Is Right for You?

Choosing between a 15-year and 30-year mortgage is one of the most consequential decisions you'll make when buying a home. It affects your monthly budget, how much interest you pay over the life of the loan, and how quickly you build equity. The right answer depends on your income, your financial goals, and how much flexibility you need in your monthly budget.

Let's break down the real numbers so you can make an informed choice instead of just going with whatever your lender defaults to.

The Basics: How the Two Loans Compare

Both are fixed-rate mortgages (assuming we're comparing apples to apples). The only structural difference is the repayment timeline. But that one difference creates a cascade of effects.

• 15-year mortgage: Higher monthly payments, lower interest rate, dramatically less total interest paid, home paid off in half the time.
• 30-year mortgage: Lower monthly payments, slightly higher interest rate, significantly more total interest paid, but more monthly cash flow for other goals.

According to Freddie Mac's Primary Mortgage Market Survey, 15-year rates are typically 0.5 to 0.75 percentage points lower than 30-year rates. That rate gap, combined with the shorter payoff period, creates massive interest savings.

A Real-World Example: $320,000 Loan

Let's look at concrete numbers. Assume you're borrowing $320,000 after a down payment, with a 30-year rate of 6.75% and a 15-year rate of 6.00%.

30-Year Mortgage at 6.75%

• Monthly payment (P&I): $2,076
• Total interest paid over 30 years: $427,330
• Total amount paid: $747,330

15-Year Mortgage at 6.00%

• Monthly payment (P&I): $2,700
• Total interest paid over 15 years: $165,970
• Total amount paid: $485,970

The difference in total interest is about $261,000. That's not a typo. You save over a quarter of a million dollars by going with the shorter term. But you're paying $624 more every single month to get there.

Try the Numbers Yourself

Use the mortgage calculator below to compare different loan amounts, rates, and terms. Try entering the same loan amount with both a 15-year and 30-year term to see the monthly payment difference and total interest for your specific situation.

The Case for a 15-Year Mortgage

The 15-year mortgage is a powerful wealth-building tool. Here's why some homeowners swear by it:

• Massive interest savings: As the example above shows, you can save hundreds of thousands of dollars. That money stays in your pocket instead of going to the bank.
• Faster equity building: With the 15-year loan, more of each payment goes toward principal from day one. After 5 years, you'd have roughly $116,000 in equity on a $320,000 loan. With the 30-year loan, you'd have about $28,000 in equity after the same period.
• Lower interest rate: The rate discount you get on a 15-year loan compounds in your favor over time.
• Forced discipline: The higher payment essentially forces you to save. You can't easily redirect that money to impulse purchases. It goes straight into building your net worth.
• Mortgage-free sooner: Being completely done with housing payments at, say, age 50 instead of 65 is a game-changer for retirement planning.

The Case for a 30-Year Mortgage

Despite the interest savings of a shorter term, the 30-year mortgage remains the most popular choice for good reasons:

• Lower monthly payments: That $624 difference in the example above is significant. It could mean the difference between qualifying for a home and not qualifying at all.
• More financial flexibility: Lower required payments mean more money available for emergency savings, retirement investing, paying off high-interest debt, or other financial priorities.
• Investment opportunity cost: If you invest the $624 monthly difference in an index fund averaging 8% returns, after 15 years you'd have roughly $215,000. Compare that to the $261,000 in interest savings. Depending on actual market returns, the 30-year mortgage plus investing could come out ahead.
• Tax deduction: Mortgage interest is tax-deductible if you itemize. More interest means a larger deduction, though this benefit has diminished since the 2017 tax reform raised the standard deduction.
• Protection against inflation: A fixed payment becomes relatively cheaper over time as your income grows and inflation erodes the real value of the payment. Thirty years is a long time for inflation to work in your favor.

The Hybrid Strategy: 30-Year Loan with Extra Payments

There's a middle-ground approach that many financial planners recommend: take the 30-year mortgage but make extra payments toward principal whenever you can. This gives you the low required payment as a safety net while still allowing you to pay down the loan faster.

For example, if you take the 30-year loan at $2,076 per month but pay $2,700 (the 15-year payment amount), you'd pay off the loan in about 17 years and save a lot of interest. Not quite as much as the 15-year loan since you're paying a higher rate, but close. And if you hit a rough financial patch, you can drop back down to the $2,076 minimum without risking default.

The key requirement for this strategy is discipline. You have to actually make those extra payments consistently. If you know yourself and suspect that extra money will get absorbed into lifestyle spending, the forced higher payment of the 15-year might be better for you.

Who Should Choose the 15-Year Mortgage?

The 15-year mortgage makes the most sense if you meet several of these criteria:

• Your household income comfortably supports the higher payment (it should still fit within the 28/36 rule)
• You've already built a solid emergency fund (6+ months of expenses)
• You're already contributing at least 15% of income to retirement
• You don't have high-interest debt (credit cards, personal loans)
• You plan to stay in the home for at least 7-10 years
• You're mid-career or later and want to be mortgage-free before retirement

Who Should Choose the 30-Year Mortgage?

The 30-year makes more sense if any of these apply:

• The 15-year payment would push your housing costs above 28% of gross income
• You still need to build an emergency fund or pay off high-interest debt
• Your income is variable or you're early in your career with expected growth
• You want to maximize retirement contributions while the market has decades to compound
• You prefer flexibility and can be disciplined about investing the payment difference
• You're buying in a high-cost area where the 15-year payment is simply too steep

What About Refinancing Later?

Some buyers start with a 30-year mortgage planning to refinance to a 15-year when their income grows. This can work, but keep in mind that refinancing costs 2-5% of the loan balance in closing costs. You also have no guarantee that rates will be favorable when you're ready to refinance. It's better to choose the term that works for your current situation rather than banking on future changes.

The Bottom Line

Neither option is universally "better." The 15-year mortgage saves you a staggering amount of money in interest and builds equity fast, but it demands a higher monthly commitment. The 30-year gives you breathing room and flexibility, which has real value when life throws surprises. Think about your income stability, your other financial goals, and how much monthly cushion you need. Run the actual numbers for your situation with the calculator above, and remember that a mortgage you can comfortably afford is always better than one that looks optimal on a spreadsheet but keeps you stressed about money every month.