15-Year vs 30-Year Mortgage: Which Is Right for You?
A detailed comparison of 15-year and 30-year mortgages, including total interest costs, monthly payment differences, and which is better for your situation.
The Core Tradeoff
A 15-year mortgage has a higher monthly payment but dramatically lower total interest cost. A 30-year mortgage has a lower monthly payment but costs significantly more over time. The right choice depends on your cash flow, financial goals, and investment alternatives.
The Numbers: $350,000 Loan
At current rates (approximately 6.25% for 15-year, 6.75% for 30-year):
• 15-year mortgage: $3,002/month, $190,360 total interest, paid off in 2040
• 30-year mortgage: $2,270/month, $467,200 total interest, paid off in 2055
The 15-year saves $276,840 in interest but costs $732/month more. Over 15 years, that's $131,760 in additional payments — but you save $276,840 in interest, a net benefit of $145,080.
The Investment Argument for 30-Year
The strongest argument for a 30-year mortgage is investment opportunity cost. If you invest the $732/month difference in a diversified index fund earning 8% annually, after 15 years you'd have approximately $252,000 — potentially more than the interest savings from the 15-year loan.
Who Should Choose a 15-Year Mortgage
A 15-year mortgage makes sense if: you're within 15 years of retirement and want to own your home outright; you have high income stability; you're not maximizing tax-advantaged accounts; or you're a conservative investor who prefers guaranteed debt reduction over market returns.
Who Should Choose a 30-Year Mortgage
A 30-year mortgage makes sense if: the lower payment provides important cash flow flexibility; you're early in your career with income expected to grow; you have high-interest debt to pay off first; or you're in a high-cost market where the 15-year payment would be unmanageable.
The Hybrid Approach
Many financial advisors recommend a 30-year mortgage with extra principal payments. This gives you the flexibility of a lower required payment while allowing you to pay off the loan faster when cash flow allows. Making one extra mortgage payment per year reduces a 30-year loan to approximately 25 years and saves substantial interest.