Key takeaways
- 15-year rates are typically lower than 30-year rates, which adds to the interest savings.
- The 30-year loan's lower payment gives flexibility; you can still pay extra when you choose.
- Compare lender quotes for both terms on the same day, including fees, before deciding.
Where the difference comes from
Two things drive the gap. First, a shorter term means you owe the balance for half as long, so far less interest accrues. Second, lenders usually price 15-year loans at a lower rate; Freddie Mac's weekly survey typically shows the 15-year average below the 30-year average. Even at the same 6.75% rate, the 15-year loan would cost $2,831.71 a month and $189,708 in interest, still $237,477 less than the 30-year.
Choosing between them
The 15-year loan suits borrowers whose budget easily absorbs a payment about $625 higher in this example, who already have an emergency fund and retirement savings on track, and who want to own the home outright sooner. The 30-year loan suits those who value a lower required payment, want to invest the difference, or expect income to be uneven. A middle path is a 30-year loan with voluntary extra payments — test it with the extra payment mortgage calculator.
Do not forget affordability
Lenders judge the required payment against your income. A higher 15-year payment raises your debt-to-income ratio, which may reduce the price you qualify for.
Worked example
15-year: $320,000 at 6% for 180 months = $2,700.34 a month; total paid $486,062, interest $166,062. 30-year: $320,000 at 6.75% for 360 months = $2,075.51 a month; total paid $747,185, interest $427,185.
Methodology and sources
Each loan's monthly principal and interest is calculated with the standard amortization formula. Total cost is payments over the full term plus any fees you enter. Taxes, insurance and PMI are excluded because they are the same for both terms. The rates shown are illustrative; enter quotes from your lender.
Sources: Freddie Mac – Primary Mortgage Market Survey · Investopedia – Amortization · CFPB – Buying a house
Frequently asked questions
Is a 15-year mortgage always better?
It is cheaper overall, but not always better for you. A higher required payment reduces flexibility, and money tied up in home equity is hard to access.
How much lower are 15-year mortgage rates?
It varies week to week. The 15-year average in Freddie Mac's survey is typically below the 30-year average; check the latest survey or lender quotes.
Can I refinance from 30 to 15 years later?
Yes, if rates and your finances allow, but refinancing has closing costs. Paying extra on a 30-year loan can achieve a similar payoff without refinancing.
Does this include taxes and insurance?
No. Those are the same for both terms, so they do not change the comparison. Use the mortgage calculator for a full monthly payment.
Results are estimates for educational purposes and are not financial advice.