The True Cost of a 30-Year vs. 15-Year Mortgage
A 30-year mortgage costs dramatically more than a 15-year loan—often $100,000+ extra in interest. But the lower monthly payment makes homeownership possible for many buyers. Here's how to compare the true cost of each option.
Side-by-Side Comparison
Let's compare a $300,000 loan at current rates (January 2026):
- 30-year fixed: 6.75%
- 15-year fixed: 6.00%
| 30-Year | 15-Year | Difference | |
|---|---|---|---|
| Monthly P&I | $1,946 | $2,532 | +$586 |
| Total payments | $700,560 | $455,760 | |
| Total interest | $400,560 | $155,760 | $244,800 |
You pay $244,800 more in interest with the 30-year loan. That's 81% of the original loan amount—paid entirely to the bank.
Why the 15-Year Costs So Much Less
Two factors work in your favor:
Lower rate. 15-year mortgages typically run 0.5% to 0.75% below 30-year rates. Lenders take less risk with shorter loans, so they charge less.
Faster principal payoff. Higher payments attack the principal faster, leaving less balance for interest to accumulate on.
In year one of our $300,000 example:
| 30-Year | 15-Year | |
|---|---|---|
| Interest paid | $20,046 | $17,645 |
| Principal paid | $3,306 | $12,739 |
| Remaining balance | $296,694 | $287,261 |
After just one year, the 15-year borrower has $9,433 more equity.
Monthly Budget Impact
The 15-year payment is 30% higher. For many households, that's the deciding factor.
Using the 28% rule (housing ≤28% of gross income):
| Loan Term | Required Gross Income |
|---|---|
| 30-year ($1,946 + $400 taxes/insurance) | $8,379/month |
| 15-year ($2,532 + $400 taxes/insurance) | $10,471/month |
The 15-year loan requires roughly $25,000 more annual income to qualify under standard guidelines.
When the 30-Year Makes Sense
You need the lower payment to qualify. If the 15-year payment exceeds 28% of your income, the 30-year is your only option. Stretching to afford a 15-year puts you at risk if income drops.
You'll invest the difference. If you take the $586 monthly savings and invest it at 8% average returns, after 15 years you'd have approximately $210,000. That's close to the $244,800 interest difference—and you still have 15 years of that investment growing.
You want payment flexibility. A 30-year loan lets you pay extra when you can afford it, but doesn't require it. If you lose your job, you can fall back to the minimum payment.
You're buying more house. The lower payment lets you qualify for a more expensive home. Whether that's wise depends on your priorities, but it's mathematically true.
When the 15-Year Makes Sense
You can comfortably afford it. If the 15-year payment stays well under 28% of your income, the interest savings are substantial. You're not stretching—you're optimizing.
You're close to retirement. Entering retirement mortgage-free provides security. If you're 50 and buying, a 15-year loan means you're done at 65.
You won't invest the difference. Be honest: will you actually invest that $586/month, or will it disappear into lifestyle spending? If you're not disciplined about investing, the forced savings of a 15-year loan builds wealth automatically.
You have other debts paid off. No car payment, no student loans, no credit card balances? The 15-year makes more sense when your debt-to-income ratio has room.
The Middle Ground: 30-Year with Extra Payments
You can capture most 15-year benefits with a 30-year loan by making extra principal payments:
Adding $300/month to principal on the $300,000, 30-year loan:
- Payoff time: 21 years, 4 months (instead of 30)
- Total interest: $270,115 (instead of $400,560)
- Interest saved: $130,445
You don't save as much as the true 15-year (which saves $244,800), because you're paying the higher 30-year rate. But you keep flexibility—if money gets tight, you can drop the extra payment.
Refinancing Considerations
Some buyers start with a 30-year loan, then refinance to a 15-year once income grows or rates drop.
Costs to consider:
- Refinance closing costs: 2-5% of loan amount
- Time to recoup costs through lower rate
- Reset of amortization schedule
This strategy works when rates drop significantly (1%+) or your income increases enough to comfortably handle the higher payment.
Tax Implications
Mortgage interest is tax-deductible if you itemize. Paying less interest means a smaller deduction.
On the 30-year loan, you'd deduct roughly $20,000 in interest during year one. At a 24% tax bracket, that's $4,800 in tax savings.
On the 15-year, year-one interest is about $17,600—tax savings of $4,224.
The 30-year's tax benefit is $576 higher in year one, declining each year as principal grows. Over the life of the loans, the tax difference doesn't come close to offsetting the $244,800 interest gap.
Your Next Steps
- Run your specific numbers in our mortgage calculator
- Calculate what you'd need to invest monthly to match the 15-year's savings
- Honestly assess whether you'll make those investments
- Consider the 30-year with extra payments as a middle option
- Talk to a lender about qualifying for both terms
The "best" choice is the one you'll actually follow through on. A 15-year loan you can barely afford is worse than a 30-year loan with consistent extra payments.