The 15-year vs 30-year mortgage decision is one of the biggest financial choices homebuyers face. A shorter term means higher payments but massive interest savings. Here’s how to decide.
Table of Contents
15-Year vs 30-Year Mortgage Comparison
Using a $350,000 mortgage (typical after 20% down on the median home):
| Factor | 15-Year Mortgage | 30-Year Mortgage |
|---|---|---|
| Interest rate (2026 typical) | 5.80% | 6.50% |
| Monthly payment (P&I) | $2,921 | $2,212 |
| Monthly difference | +$709 | — |
| Total interest paid | $175,700 | $446,300 |
| Interest savings | $270,600 | — |
| Total cost (principal + interest) | $525,700 | $796,300 |
| Mortgage-free by | 2041 | 2056 |
| Equity at year 5 | $157,200 | $47,200 |
| Equity at year 10 | $283,800 | $108,500 |
Monthly Payment Comparison by Loan Amount
| Loan Amount | 15-Year Payment (5.8%) | 30-Year Payment (6.5%) | Difference | Interest Saved |
|---|---|---|---|---|
| $200,000 | $1,669 | $1,264 | $405 | $154,600 |
| $300,000 | $2,504 | $1,896 | $608 | $232,000 |
| $400,000 | $3,338 | $2,528 | $810 | $309,200 |
| $500,000 | $4,173 | $3,160 | $1,013 | $386,600 |
| $600,000 | $5,007 | $3,792 | $1,215 | $463,800 |
When a 15-Year Mortgage Is Better
| Situation | Why 15-Year Wins |
|---|---|
| Higher income / can easily afford payment | Save $150,000-$400,000+ in interest |
| Near retirement | Own home before retiring |
| Already maxing retirement contributions | Extra cash flow goes to faster payoff |
| Want to build equity fast | 3x more equity in first 5 years |
| Low-risk personality | Smaller total financial commitment |
| Lower rate | 0.5-0.75% rate discount vs 30-year |
When a 30-Year Mortgage Is Better
| Situation | Why 30-Year Wins |
|---|---|
| Lower or moderate income | Affordable monthly payment |
| Want to invest the difference | If investments earn more than mortgage rate |
| Need budget flexibility | Lower required payment, can prepay when able |
| Uncertain job situation | Less risk if income drops |
| Plan to move in 5-10 years | Lower payment while you’re in the home |
| First-time buyer | Easier to qualify, lower DTI |
The “Invest the Difference” Argument
What if you took the 30-year mortgage and invested the $709/month difference?
| Scenario | Value After 15 Years | Value After 30 Years |
|---|---|---|
| 15-year mortgage (home paid off) | Home paid off, $0 invested | Home paid off, invest full payment for 15 years: $887,000 |
| 30-year + invest $709/month at 7% | $219,000 invested | Home paid off + $852,000 invested |
| 30-year + invest $709/month at 10% | $275,000 invested | Home paid off + $1,441,000 invested |
If you actually invest the difference at 7%+, the 30-year mortgage can come out ahead. But the key word is “actually” — most people spend the extra cash flow rather than investing it.
How Fast You Build Equity
| Year | 15-Year Equity % | 30-Year Equity % |
|---|---|---|
| Year 1 | 26% | 22% |
| Year 3 | 34% | 23% |
| Year 5 | 45% | 25% |
| Year 10 | 72% | 34% |
| Year 15 | 100% | 46% |
| Year 20 | 100% | 61% |
| Year 30 | 100% | 100% |
Includes 20% initial down payment and assumes no appreciation.
This faster equity build is valuable for accessing home equity loans or HELOCs and eliminating PMI earlier.
The Compromise: 30-Year With Extra Payments
You can get much of the 15-year benefit with a 30-year mortgage by making extra payments:
| Strategy | Result |
|---|---|
| 30-year with biweekly payments | Paid off in ~25 years |
| 30-year + $200/month extra | Paid off in ~22 years, save $115,000 |
| 30-year + $500/month extra | Paid off in ~18 years, save $195,000 |
| 30-year + $709/month extra (matching 15-yr) | Paid off in ~15 years, save $255,000 |
This approach gives you the flexibility of lower required payments while still accelerating your payoff. However, note that you pay a slightly higher rate on the 30-year, so the interest savings are slightly less than a true 15-year mortgage.
Income Requirements
Based on the 28% housing DTI rule:
| Loan Amount | Minimum Income (15-Year) | Minimum Income (30-Year) |
|---|---|---|
| $200,000 | $71,500/year | $54,200/year |
| $300,000 | $107,300/year | $81,300/year |
| $400,000 | $143,000/year | $108,300/year |
| $500,000 | $178,800/year | $135,400/year |
The 15-year mortgage requires roughly 32% more income to qualify for the same loan amount.
Bottom Line
The 15-year mortgage is the mathematically superior choice if you can comfortably afford the higher payment. It saves $150,000-$400,000+ in interest and builds equity much faster. However, the 30-year offers critical flexibility for those with tighter budgets or who want to invest the difference.
A solid middle ground: take the 30-year for flexibility, but make extra payments as if you had a 15-year. Use our mortgage payment calculator to model your specific scenario.
