15-year vs 30-year mortgage: what the difference really costs
A longer term lowers your monthly payment. It also changes how much you pay the bank in total, by a lot more than most buyers expect.
Key takeaways
- On a 280,000 loan at 6.25%, a 30-year term costs about 340,600 in interest, against 152,100 over 15 years.
- The 15-year payment is about 677 higher each month, but saves roughly 188,500 in interest.
- After 10 years, the 30-year borrower still owes about 84% of the original loan.
How a mortgage payment is calculated
Most home loans are repaid in equal monthly amounts. Each payment covers the interest for that month, and the rest reduces the balance. The payment is set so the balance reaches zero at the end of the term.
Payment = L × r ÷ (1 − (1 + r)−n)
L is the loan, r the monthly rate (yearly rate ÷ 12 ÷ 100) and n the number of monthly payments.
To keep the comparison fair, every example here uses the same loan: 280,000 at a fixed 6.25%, which is what remains after a 20% down payment on a 350,000 home.
Monthly payment and total interest by term
| Term | Monthly payment | Total interest |
|---|---|---|
| 15 years | 2,400.78 | 152,141 |
| 20 years | 2,046.60 | 211,184 |
| 25 years | 1,847.07 | 274,122 |
| 30 years | 1,724.01 | 340,643 |
Stretching the loan from 15 to 30 years lowers the payment by about 28%, but more than doubles the interest. Each extra five years adds between 59,000 and 67,000 in interest.
- Total interest
Show the data
| Term | Total interest |
|---|---|
| 15 years | $152,141 |
| 20 years | $211,184 |
| 25 years | $274,122 |
| 30 years | $340,643 |
Why longer loans cost so much more
Interest is charged on whatever you still owe. On a long loan, the monthly payment only just covers the interest at first, so the balance falls very slowly. In the first month of the 30-year loan, about 1,458 of the 1,724 payment is interest and only 266 reduces the debt. On the 15-year loan, about 943 goes to the balance in month one.
- 30-year loan
- 15-year loan
Show the data
| Year | 30-year loan | 15-year loan |
|---|---|---|
| 0 | $280,000 | $280,000 |
| 5 | $261,344 | $213,821 |
| 10 | $235,866 | $123,438 |
| 15 | $201,069 | $0 |
| 20 | $153,545 | $0 |
| 25 | $88,641 | $0 |
| 30 | $0 | $0 |
After 10 years, the 15-year borrower owes about 123,400. The 30-year borrower still owes about 235,900. That slower progress matters if you plan to sell or refinance, because your equity will be much lower.
When a 30-year term makes sense
- Cash flow. A lower payment leaves room for childcare, emergencies or a business.
- Flexibility. If your lender allows overpayments without penalties, you can pay extra when money is good and fall back to the minimum when it isn't.
- Other goals. If you would otherwise skip retirement contributions that attract an employer match, the lower payment may be the better trade.
When a shorter term wins
- You can afford the higher payment comfortably, with savings to spare.
- You want to be mortgage-free before a set date, such as retirement.
- Your lender offers a lower rate on shorter terms, which widens the savings further.
- Your income is stable and unlikely to fall, so a higher fixed commitment carries less risk.
The middle path: a long term with overpayments
Many borrowers take a longer term for safety and overpay each month. Early overpayments reduce the balance while interest charges are highest, so they save the most. Check whether your contract limits overpayments or charges early repayment fees.
What if interest rates change?
Everything above assumes a fixed rate for the whole term. With a variable or adjustable rate, the payment is recalculated when the rate moves. On the 30-year example, a one-point rise from 6.25% to 7.25% would lift the payment from about 1,724 to about 1,910 if it applied from the start. On the 15-year loan, the same rise adds less in cash terms, because more of each payment already goes to the balance and there are fewer years left for interest to build up.
If you choose a variable rate, test a few higher rates in the calculator and make sure you could still afford the payment. Keeping a savings buffer of several months' payments gives you time to adjust if rates rise faster than expected.
Don't forget the other monthly costs
Property tax, home insurance and, in some cases, mortgage insurance are paid on top. On the example loan, 3,000 of yearly tax and 1,200 of insurance lift the 30-year monthly cost from 1,724 to about 2,074. A common guideline is to keep total housing costs below roughly 28% to 35% of gross income, but lenders set their own limits.
Use the mortgage calculator to test your own price, rate and term, and open the yearly schedule to see exactly how your balance would fall. For decisions, ask lenders for official quotes, as this guide is general information only.
Work out your own numbers
Monthly payment, total interest and a yearly repayment schedule.
Open the Mortgage calculatorFrequently asked questions
Is a 15-year mortgage better than a 30-year mortgage?
It costs far less interest and builds equity faster, but the payment is higher. It is better only if the payment is comfortable.
How much interest do you pay on a 30-year mortgage?
On 280,000 at 6.25%, about 340,600, which is more than the amount borrowed.
Why is most of my early payment interest?
Interest is charged on the remaining balance, which is highest at the start of the loan.
Can I pay off a 30-year mortgage in 15 years?
Often, yes, by overpaying every month. Check your lender's rules on overpayments and fees.
Do shorter mortgages have lower rates?
Many lenders price shorter terms lower, but it varies, so compare offers.