The short answer
A 15-year mortgage costs more each month and far less in total. A 30-year mortgage keeps the monthly payment lower and gives you more flexibility, but you pay interest for twice as long and usually at a higher rate.
The CFPB notes that shorter loan terms generally carry lower interest rates, and that the gap can be as large as a full percentage point. Rates differ by lender and change often, so the figures below use example rates only: 5.75% for the 15-year loan and 6.5% for the 30-year loan. They are not current quotes.
Side-by-side on a $300,000 loan
On a $300,000 loan, the 15-year option costs about $595 more per month and saves about $234,000 in interest. Both payments below are principal and interest only, calculated with the standard amortization formula. Property taxes, homeowners insurance and any mortgage insurance would be added on top and are the same no matter which term you pick.
| Item | 15-year at 5.75% (example) | 30-year at 6.5% (example) |
|---|---|---|
| Number of payments | 180 | 360 |
| Monthly principal and interest | $2,491.23 | $1,896.20 |
| Total interest | $148,421.45 | $382,633.47 |
| Total paid (principal plus interest) | $448,421.45 | $682,633.47 |
| Principal paid off after 5 years | $73,048.38 | $19,167.07 |
| Balance left after 5 years | $226,951.62 | $280,832.93 |
The monthly difference is $595.03. The interest difference over the life of the loans is $234,212.02. On the 30-year loan, you would pay more in interest than the original loan amount.
The five-year rows show the other big difference: equity. In the first five years of the 15-year loan, $73,048.38 of your payments goes to principal. On the 30-year loan, only $19,167.07 does, because early payments on a long loan are mostly interest. Faster equity matters if you plan to sell, refinance or borrow against the home later.
Why the 15-year loan costs so much less
Two forces work together. First, you borrow the money for half as long, so interest has fewer months to accrue. Second, the shorter loan usually has a lower rate, so each of those months costs less.
The higher payment also pushes the balance down faster. In the first month of the 15-year example, $1,437.50 of interest is due and the remaining $1,053.73 cuts the balance. In the first month of the 30-year example, $1,625.00 is interest and only $271.20 goes to principal. A lower balance means less interest the next month, and the gap grows over time.
The middle option: pay a 30-year like a 15-year
You can take a 30-year loan and send extra principal each month. This keeps the lower required payment as a safety net while capturing much of the savings.
Worked example: $2,491.23 a month on the 30-year loan
Take the same $300,000, 30-year loan at the 6.5% example rate. Instead of the required $1,896.20, you pay $2,491.23 each month, the same amount as the 15-year payment. The extra $595.03 goes straight to principal.
The loan is paid off in 196 months, about 16 years and 4 months. Total interest drops to about $187,166.56. That saves about $195,466.91 compared with making only the required 30-year payment. It still costs about $38,745.11 more than the 15-year loan, because the 30-year loan carries the higher example rate.
The trade is clear in the numbers. You give up roughly $38,700 of savings compared with the 15-year loan in exchange for the right to drop back to $1,896.20 in a tight month. Whether that flexibility is worth the cost depends on how steady your income is and how much cash you keep in reserve.
Two practical points. Tell your servicer that extra money is a principal payment, and check that it shows up that way on your statement. Also check your loan documents for a prepayment penalty. The CFPB explains that some mortgages charge one, most often if you pay off the whole balance within the first few years, and that small extra principal payments normally do not trigger it. Confirm with your lender before you start.
Who each loan tends to suit
A 15-year mortgage often fits if you
- Can handle the higher payment and still save for emergencies and retirement
- Have steady, predictable income
- Want to own the home outright by a target date, such as before retirement
- Value the lowest total interest cost over monthly flexibility
A 30-year mortgage often fits if you
- Need the lower payment to qualify or to keep your budget comfortable
- Have variable income, such as commissions or self-employment
- Want room in the monthly budget for other goals, like retirement contributions or paying off higher-rate debt
- Like the option to prepay when you can, without being locked into a higher required payment
The lower payment on a 30-year loan can also help with qualifying. Lenders measure your debt-to-income ratio using the required payment. In this example, the 30-year payment is $595.03 lower, which leaves more room under a lender's limit.
Questions to ask before you choose
Start with the payment you can carry in a bad month, then work toward savings. A few questions help sort it out:
- Could you still make the 15-year payment if your income dropped or a big expense came up?
- Do you have an emergency fund after the down payment and closing costs?
- How long do you expect to stay in the home? A short stay reduces the benefit of faster payoff, though the faster equity still counts when you sell.
- Would you actually send extra payments on a 30-year loan every month, or would the money drift elsewhere?
- What rates are lenders offering on each term today? Ask for a Loan Estimate for both so you compare real numbers.
Running both terms through a calculator with your own quotes is the clearest way to see the trade. The structure of the comparison stays the same at any rate: a shorter term means a higher payment, faster equity and much less total interest.