15-year vs 30-year mortgage: which actually saves you more?

Most personal-finance writing makes 15 vs 30 sound like a morality test: 15-year terms are “disciplined,” 30-year terms are for the “extended adolescents.” That framing doesn’t hold up to numbers. The two terms solve different problems, and the right one depends on three things you can actually measure.

The headline trade-off

A 15-year mortgage saves you interest in two ways. The rate is typically 0.5-0.75 percentage points lower than the 30-year rate, and you pay interest for half as long. The cost is a meaningfully higher monthly payment.

On a $400,000 loan at current rates (you can verify with our mortgage calculator):

• 30-year @ 6.5%: Monthly $2,528 · Total interest $510,178 over the life of the loan.
• 15-year @ 6.0%: Monthly $3,375 · Total interest $207,577 over the life of the loan.

Headline: the 15-year saves $302,601 in interest at a cost of $847/monthmore in payments. That feels like a no-brainer. It isn’t.

The opportunity-cost flip

Money you don’t put toward a higher mortgage payment can go somewhere else. If that “somewhere else” earns more than your mortgage rate, the math flips.

Suppose you take the 30-year mortgage and invest the $847/month you saved on payments. At a long-run equity return of 7% (a common conservative planning number), compound interest produces:

• $847/month × 15 years @ 7%: ~$268,000 at year 15.
• That continues compounding for the remaining 15 years even if you stop contributing: ~$740,000 at year 30.

The 30-year mortgage with disciplined investing of the difference produces about $430,000 more wealth than the 15-year mortgage at the same point in time — despite paying more total interest. The 30-year wins on lifetime wealth in the long-run-equity scenario.

You can run this yourself with our compound interest calculator. Start with $0, add the monthly difference, and set the time horizon to your mortgage term.

When the 15-year actually wins

Three scenarios where the 15-year math is genuinely better:

1. You won’t actually invest the difference. The opportunity-cost argument assumes you funnel that extra $847/month into an index fund every single month for 15 years. Behavioural research consistently shows that most people don’t. If the savings will get absorbed into lifestyle spending, the forced-savings discipline of the 15-year payment captures more of the value.
2. Your risk tolerance is low.The 7% return assumed above is an average; it includes years of -30% drawdowns. If you can’t emotionally hold through those years, your realised return will be lower than the planning number. Paying off a fixed-rate mortgage is a guaranteed return equal to your interest rate, with zero variance.
3. You’ll keep working past 65.The 15-year math wins for people who’ll still be earning when the 15-year mortgage ends and the 30-year hasn’t yet. Paying off the house frees cash flow at exactly the point most people are looking to reduce hours or retire.

When the 30-year actually wins

1. You have higher-return capital uses.A maxed-out 401(k) match captures 50-100% on the first dollar contributed. That dwarfs your mortgage rate. Don’t starve those accounts to accelerate a 6% loan.
2. You’re early in your earnings curve. Cash flow flexibility matters more when you’re likely to be earning more in 10 years than today. The 30-year loan’s lower required payment preserves room to pivot — leaving a job, starting a business, taking parental leave — without re-mortgaging.
3. You’re betting on inflation. A fixed-rate mortgage is a 30-year short position on currency. Higher-than-expected inflation erodes the real cost of fixed future payments. The 15-year locks in less of that exposure.

The math you should actually run

Before signing anything, plug your numbers into our mortgage calculator for both terms, and into our compound interest calculatorfor the “invest the difference” scenario. The break-even rate of return — below which 15-year wins, above which 30-year wins — is usually somewhere between 5% and 8% real terms depending on your tax situation.

Then ask yourself, honestly, whether you’ll actually invest the difference. If the answer is “probably not,” the 15-year is the right call regardless of what the spreadsheet says.

What this guide doesn’t cover

Adjustable-rate and interest-only loans are out of scope — they trade certainty for cash flow in different ways. PMI (required when you put less than 20% down) inflates the effective rate by 0.3-1.5%; account for it separately. Tax treatment of mortgage interest varies by country and tax bracket; in the US the standard deduction makes the deduction irrelevant for most homeowners post-2017 tax reform, but it still matters above the SALT cap. Run the numbers with and without the deduction to see how much it actually moves.

The honest takeaway

If you’ll genuinely invest the savings every month for 30 years, take the 30-year mortgage. If you’re uncertain about that, take the 15-year. If you can’t afford the 15-year payment without strain, take the 30-year and either invest the difference or accept that you’ve effectively bought less house.

The interest-paid figure on its own is misleading. The meaningful comparison is total wealth at the end of the longer term, including the value of optionality along the way. Calculate both. The right choice will be obvious from the numbers, not the morality.

Worked example: the break-even return rate

Same $400k loan as the headline example. We ask: at what invested-difference return rate do the two terms produce identical total wealth at year 30?

• Year 30 net wealth, 15-year: home paid off by year 15, then $3,375/month invested for 15 years at 7% = ~$1,065,000 in the investment account plus the house.
• Year 30 net wealth, 30-year (invest the $847 difference at 7%): house paid off at year 30, plus ~$1,030,000 in the investment account.

At a 7% return assumption, the 15-year edges out by ~$35,000 over the full 30-year horizon because the 15-year saver redirects the entire $3,375 payment into investments for the second half — a larger contribution for longer than the 30-year saver redirects. At 8%, the ranking flips; at 6%, the 15-year wins by ~$120,000. The break-even return for this specific loan is around 7.4% nominal.

Practical reading: if you genuinely earn above ~7.4% on the difference, 30-year wins. If you earn below, 15-year wins. The honest forecast is somewhere in that range; the decision rides on the dispersion around it, your confidence in actually investing, and the non-financial factors below.

Common mistakes

• Picking the term based on intuition about interest paid. Total interest is a derived number, not the goal. The goal is total wealth + optionality; interest is a cost component, not the decision variable.
• Refinancing a 30-year into a 15-year mid-stream. Adds closing costs (~$3-6k) for what amounts to a payment-restructure you could accomplish for free by making extra principal payments on the existing 30. Only refinance when the rate drop justifies the closing costs independently; see mortgage refinance break-even.
• Ignoring the tax-advantaged-account interaction. 401(k) and IRA space is annual. If you take the 15-year and the higher payment crowds out tax-advantaged contributions, you may be paying off a 6% loan while skipping a 50%-match employer contribution. The opportunity cost dwarfs the interest rate.
• Treating “invest the difference” as a switch. Behavioural research shows intentions decay. Auto-transferring the difference to a brokerage account the same day the mortgage payment clears is the only design that consistently captures the 30-year wealth advantage; absent that automation, the 15-year forced-savings discipline wins by default.
• Skipping the partial-prepayment alternative. A 30-year with consistent extra principal payments (say, an extra $300/month) often reaches payoff in 18-22 years at lower required-payment risk than the 15-year. The flexibility costs little and the math is comparable.

For the underlying compounding math, see compound interest explained. For the affordability question upstream of this decision, see how much house can I afford.