15- vs 30-year mortgage: which is actually cheaper?

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.

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.