By the CalcLedger editorial team · Updated September 2026 · Examples use illustrative rates · How we calculate
Choosing a mortgage term is one of the biggest financial decisions most people make, and it's often made in a few minutes at the lender's desk. A 15-year and a 30-year loan for the same house can differ by hundreds of dollars a month and by hundreds of thousands in total interest. Here's how to think about the trade-off.
Why 15-year loans cost so much less
Two things work in your favor with a 15-year mortgage:
- A lower rate. Lenders usually price 15-year loans somewhere around half a percentage point to three-quarters of a point below 30-year loans, because their money is at risk for less time.
- Half the time for interest to build. You pay down principal much faster, so interest is charged on a shrinking balance from the start.
Side by side: a $320,000 loan
These examples use illustrative rates of 6.5% for 30 years and 5.75% for 15 years. Principal and interest only.
| 30-year at 6.5% | 15-year at 5.75% | |
|---|---|---|
| Monthly payment | $2,023 | $2,657 |
| Total interest | $408,142 | $158,316 |
| Total paid | $728,142 | $478,316 |
The 15-year loan costs $635 more a month but saves about $250,000 in interest. On the 30-year loan, you pay more in interest than you borrowed.
Total interest on a $320,000 mortgage
Illustrative rates: 6.5% for 30 years, 5.75% for 15 years
The case for the 15-year mortgage
- Massive interest savings, as the table shows.
- Owning your home outright sooner. Being mortgage-free in your 40s or 50s frees up a large amount of monthly cash for retirement savings or college costs.
- Built-in discipline. The higher payment forces equity building that many people wouldn't do voluntarily.
The case for the 30-year mortgage
- A lower required payment. The $635 difference can be the line between a comfortable budget and a stretched one. It also helps you qualify: lenders size your loan by the payment, so a 30-year term can make a higher price affordable under the 28/36 rule.
- Flexibility. You can always pay extra on a 30-year loan, but you can't pay less on a 15-year loan in a hard month. Job loss, medical bills, or a new baby are easier to handle with a lower required payment.
- Other uses for the money. If you'd otherwise miss out on an employer 401(k) match, or you carry high-interest debt, putting the extra money there first usually makes more sense.
The hybrid: a 30-year loan paid like a 15-year
There's a middle path. Take the 30-year loan, but voluntarily pay the 15-year amount of $2,657 each month. The extra $635 goes straight to principal.
- The loan is paid off in about 196 months, a little over 16 years.
- Total interest is about $199,600, roughly $208,000 less than the regular 30-year schedule.
That costs about $41,000 more in interest than a true 15-year loan, because the 30-year rate is higher. What it buys you is the right to drop back to the $2,023 payment any month you need to. Some people consider that insurance well worth the price. Before choosing this route, confirm your loan has no prepayment penalty, and make sure extra payments are applied to principal.
Don't overlook the 20-year mortgage
Many lenders also offer 20-year terms, though few borrowers ask about them. At an illustrative 6.25% on the same $320,000 loan, the payment is about $2,339, roughly $316 more than the 30-year loan and $318 less than the 15-year. Total interest is about $241,000, around $167,000 less than the 30-year. If the 15-year payment is too much but you want to be mortgage-free well before retirement, the 20-year term is worth a quote. Ten-year and 25-year terms exist too. The general pattern holds: each shorter term raises the payment and cuts the total cost.
How rates change the decision
The gap between the two terms grows as rates rise. At 3%, a 30-year loan's total interest is a fraction of the loan amount, and keeping the cheaper payment costs relatively little. At 6% to 7%, the 30-year loan's interest exceeds the amount borrowed, so paying it down faster matters more. If rates fall later, you can refinance either loan, though that comes with closing costs to recover.
What about investing the difference?
A common argument is to take the 30-year loan and invest the $635 a month instead. Over long periods, a diversified stock portfolio has historically returned more than current mortgage rates, so this can come out ahead. But the return isn't guaranteed, and it only works if you actually invest the money every month for decades. Paying down a 6.5% mortgage is a guaranteed 6.5% return. You can model the investing side with the compound interest calculator.
A simple way to decide
- Choose 15 years if the payment fits comfortably inside 28% of your gross income, you have a solid emergency fund, and you're already getting any employer retirement match.
- Choose 30 years if the 15-year payment would strain your budget, your income is irregular, or you're still building savings.
- Choose 30 years and pay extra if you can afford the 15-year payment but want a safety margin.
Enter your own price, rate, and both terms in the mortgage calculator. The difference in total interest is usually the most convincing number on the page.