15-year vs 30-year mortgage: which is the better deal?
A 15-year mortgage costs roughly half the total interest of a 30-year one. The trap is whether the higher payment crowds out higher-return uses of the same money.
The headline numbers
On a $400,000 mortgage at 6.5%:
- 30-year: $2,528/mo, $510k of total interest over the life of the loan.
- 15-year: $3,484/mo, $227k of total interest. Less than half.
That's the case for the 15-year. You shovel an extra $956 a month into principal and you save $283k of bank profit. Verify these for your own numbers in the Mortgage calculator.
Why the 30-year still wins for most people
The $956/month gap isn't free. The honest comparison is 15-year mortgage vs 30-year mortgage plus invest the difference. If your investments earn more than your mortgage rate, the 30-year strategy ends up with more wealth.
At a 6.5% mortgage rate and a 7% expected long-run market return, the gap is small but in favor of the 30-year. The 30-year also offers flexibility — in a bad year you keep the lower mandatory payment; you can always send extra principal voluntarily.
When the 15-year is the right call
- Rate gap. 15-year mortgages typically price 0.5–0.75 percentage points lower than the 30-year. That tightens the math in the 15's favor.
- Behavioral. If you wouldn't actually invest the $956 difference month after month, the 15-year forces the saving for you.
- Risk aversion. Paying off the house in 15 years instead of 30 cuts your sequence-of-returns risk near retirement and removes a major fixed cost from your budget a decade earlier.
- You're close to retirement. A debt-free retirement is psychologically and operationally simpler.
The hidden third option: 30-year with extra payments
You can take the 30-year for the lower mandatory payment and send extra principal whenever you can. The Mortgage Payoff calculator shows exactly how many years (and how much interest) extra principal payments shave off the schedule.
Trade-off: in real life, "I'll send extra" gets defeated by every car repair and vacation. The 15-year removes that decision.
Tools to use next
- Mortgage — compare 15 vs 30 with your numbers.
- Mortgage Payoff — model 30-year-with-extra strategies.
- Refinance — when does refinancing into a shorter term pencil out?
- Amortization — see the principal/interest split month by month.