Comparison
15- vs 30-year mortgage: which is actually cheaper?
Same loan, two amortisations. The 15-year saves a fortune in interest — but only if you can absorb the monthly delta.
By Buğra SözeriPublished
TL;DR. A 15-year mortgage saves roughly 55% of total interest compared to a 30-year on the same principal, but the monthly payment is 35-45% higher. The 30-year wins on cash-flow optionality (you can voluntarily prepay it like a 15-year, but not the reverse).
A 30-year fixed mortgage is the US default — about 90% of new originations as of 2025. A 15-year fixed is the sophisticate’s choice: half the term, lower interest rate, dramatically less interest paid over the life of the loan. The catch is the monthly payment, which on identical principal runs 35-45% higher.
The numbers on $400,000 at 7.0% / 6.25%
Mortgage rates aren’t identical between the two terms. Lenders price the 15-year roughly 0.5-0.75% below the 30-year because the bank’s capital is at risk for half as long. Numbers below use a typical 2026 spread.
| Metric | 30-year @ 7.0% | 15-year @ 6.25% |
|---|---|---|
| Monthly payment (P&I) | $2,661 | $3,430 |
| Total interest paid | $558,036 | $217,335 |
| Total cost (principal + interest) | $958,036 | $617,335 |
| Payment delta vs 30-year | — | +$769/mo |
| Interest saved vs 30-year | — | $340,701 |
The 15-year saves $340k of interest over the life of the loan in exchange for $769 more per month. That’s a fantastic return on a forced-savings basis — provided the $769 wouldn’t earn more elsewhere.
The hidden variable: what else you’d do with $769/mo
The 15-year mortgage isn’t free money. You’re committing $769/mo for 180 months that you could otherwise invest. At an 8% real return (long-run S&P 500), $769/mo invested for 15 years grows to about $260,000.
Run the numbers fully — including the 15 years you haveafterthe 15-year mortgage pays off, during which the 30-year version is still paying $2,661/mo — and the gap narrows considerably. The 15-year still wins for most people on after-tax terms, but the margin shrinks from “no contest” to “a few tens of thousands.”
Compute this for your exact rate spread and term with the mortgage calculatorand the compound interest calculator.
Cash-flow risk is the real argument for 30-year
The 30-year mortgage is not actually a 30-year commitment — it’s a 30-year payment option. You can always pay extra principal, effectively converting it into a 15-year amortisation. The reverse isn’t true: a 15-year mortgage commits you to the higher monthly payment even in a year you lose your job, have a medical event, or face a major unexpected expense.
For households without 6+ months of liquid emergency fund, the 30-year is usually the safer call even if the math favours the 15-year on paper. The optionality of the lower mandatory payment is worth real money.
When the 15-year clearly wins
- You have a stable, high household income and full emergency reserves.
- You’d otherwise put the difference in low-yielding savings (not invested).
- You’re close to retirement and want the mortgage paid off before income drops.
- You value certainty and lack of debt over the optionality of investing.
When the 30-year clearly wins
- You have variable income (freelance, commission, equity-heavy).
- Your emergency fund is thin.
- You have higher-return investments (employer 401k match, growing business, index funds in a tax-advantaged account).
- You’re early in your career — flexibility is more valuable than interest savings.
The hybrid: 30-year with extra principal
Take the 30-year for the optionality, and pay an extra $769/mo voluntarily. Most loans amortise correctly without any special instruction — the extra payment reduces principal directly. You get the 15-year payoff schedule with the ability to stop the extra payments any month you need to.
The only downside: the 30-year rate is higher, so you pay modestly more interest along the way. For the $400k example above, paying off the 30-year in 15 years costs about $30k more total than the actual 15-year loan. That’s the price of optionality — and it’s usually worth it.
Numeric facts ($400,000 loan, 2026-typical rates)
- 30-year fixed at 7.00%: monthly P&I $2,661.21; total interest $558,036; total paid $958,036.
- 15-year fixed at 6.25%: monthly P&I $3,429.81; total interest $217,365; total paid $617,365.
- Interest delta: $340,671 lifetime savings on the 15-year — 61% less interest.
- Payment delta: +$768.60/month for the 15-year — 28.9% higher monthly.
- Typical rate spread (FRED MORTGAGE15US vs MORTGAGE30US, 2020-2025 avg): 15-year sits 0.55-0.80 percentage points below 30-year, varying with yield curve.
- Equity build at year 5: 30-year @ 7% — $25,432 principal paid (6.4% of balance); 15-year @ 6.25% — $96,847 principal paid (24.2%) — 3.8× faster equity build.
- Opportunity cost of $769/mo invested at 8% real for 15 years: ~$262,300 future value; for the full 30 years, ~$1.04 M.
- Qualifying income required (28/36 rule): 30-year needs ~$114K gross household income; 15-year needs ~$147K — roughly 29% more income to qualify.
- US origination mix (MBA, 2025): ~89% of conventional refis are 30-year, ~9% are 15-year, remainder 20-year and other terms.
Decision matrix
| Household profile | Better choice |
|---|---|
| Dual-income, 6+ months emergency fund, age <45 | 15-year if you wouldn’t invest the difference |
| Single income or commission-based | 30-year for cash-flow resilience |
| Within 15 years of retirement | 15-year — mortgage paid off before income drops |
| Has employer 401(k) match unused | 30-year, capture match first |
| Thin emergency fund (<3 months) | 30-year, build cushion first |
| Refinancing existing mortgage | Compare break-even months including closing costs |
| High-tax state, itemising deductions | 30-year retains larger interest deduction longer |
| Plans to move within 7 years | 30-year (or 7/6 ARM) — interest savings won’t accrue |
Sources
- Freddie Mac Primary Mortgage Market Survey (PMMS) — weekly 30-year and 15-year fixed rate history — freddiemac.com/pmms.
- Federal Reserve Economic Data (FRED) — MORTGAGE30US, MORTGAGE15US — fred.stlouisfed.org.
- Consumer Financial Protection Bureau — Loan Estimate regulation (12 CFR §1026.37) defines disclosure of APR and total interest — consumerfinance.gov.
Frequently asked questions
- How much interest does the 15-year actually save?
- On a $400,000 loan at typical 2026 rates (7.0% for 30-year, 6.25% for 15-year), the 15-year saves about $340,000 in total interest. The monthly payment is about $769 higher. Saving compounds — you also stop paying after 15 years rather than 30.
- Should I always take the 15-year if I can afford it?
- Not necessarily. The 30-year gives you optionality — you can voluntarily pay extra to mimic the 15-year schedule, but you can't reverse the commitment if you lose your job or have a medical event. For households without 6+ months of emergency savings, the 30-year is usually the safer choice.
- Why is the 15-year rate lower than the 30-year rate?
- Because the lender's capital is at risk for half as long, so the term-structure premium is smaller. The typical spread is 0.5-0.75 percentage points, varying with the yield curve. When the curve is flat or inverted, the spread narrows.
- Can I refinance a 30-year into a 15-year later?
- Yes — and many people do this when income rises or rates drop. The closing costs (typically $3,000-6,000) eat into the interest savings, so the math only works if the rate gap is meaningful or you'd be refinancing anyway. Running both scenarios in a mortgage calculator first is the standard practice.
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Published May 16, 2026