15 vs 30 Year Mortgage
Shorter terms usually price lower — check both quotes
Interest the 15-year avoids
$312,283
- 15-year monthly payment
- $3,321.64
- 30-year monthly payment
- $2,528.27
- Extra per month
- $793.37
- Total interest, 15-year
- $197,895
- Total interest, 30-year
- $510,178
- Total paid, 15-year
- $597,895
- Total paid, 30-year
- $910,178
- Still owed at year 15 on the 30-year
- $290,237
- Portfolio after 30 years, 15-year plan(investing the payment after payoff)
- $1,052,835
- Portfolio after 30 years, 30-year plan(investing the difference all along)
- $967,886
- Return where the 30-year catches up(break-even)
- 7.8%
Same monthly outlay, 30 years: who ends with more
| Return | 15-year plan | 30-year plan | Ahead |
|---|---|---|---|
| 4% | $817,424 | $550,637 | 15-year |
| 5% | $887,838 | $660,288 | 15-year |
| 6% | $965,995 | $796,950 | 15-year |
| 7% | $1,052,835 | $967,886 | 15-year |
| 8% | $1,149,415 | $1,182,404 | 30-year |
| 9% | $1,256,928 | $1,452,454 | 30-year |
| 10% | $1,376,721 | $1,793,399 | 30-year |
Both columns put the same cash to work every month and both end with the house paid off. Taxes on gains are not counted.
- • The 30-year loan only wins if you actually earn more than 7.8% a year on the difference — and that return is not guaranteed, while the interest you avoid on the 15-year loan is.
- • Both plans put the same cash to work every month for 30 years and both end with the house paid off. Taxes on investment gains are not modeled.
The interest you avoid on the 15-year loan is a guaranteed return equal to the mortgage rate — the market number is not. If your rate is above today's, the refinance calculator checks whether switching first is cheaper; the amortization schedule calculator shows either loan month by month.
On a $400,000 loan at 6.5% for 30 years or 5.75% for 15 years, the payments are $2,528.27 and $3,321.64 — a gap of $793.37 a month. Over the full term the 15-year costs $197,895 in interest against $510,178, a saving of $312,283. Give both plans the same monthly outlay for 30 years and the 15-year still comes out ahead unless your investments earn more than 7.8% a year.
Two loans, one monthly budget
The usual comparison is wrong. Putting $3,321.64 and $2,528.27 side by side compares plans that take different amounts of cash out of your month. The fair version gives both plans the same monthly outlay — the 15-year payment — for the full 30 years:
15-year plan pay $3,321.64 for 180 months, then invest $3,321.64 for the next 180 months
30-year plan pay $2,528.27 for 360 months and invest the $793.37 difference all 360 months
Both end at month 360 with the house paid off and a portfolio built from the same total cash. Whichever portfolio is larger wins. At a 7% return, the 15-year plan ends with $1,052,835 against $967,886 for the 30-year — the shorter loan wins by $84,948 even before you count the risk difference.
The cut-over is the break-even return: 7.8% here. Above it the 30-year plan pulls ahead, because the invested difference compounds for twice as long; below it the 15-year wins. That number depends on the two rates and the terms, not on the loan size — it is the same 7.8% on a $250,000 loan or a $600,000 one.
The interest gap, at three loan sizes
| Loan | 15-year payment | 30-year payment | Monthly gap | Interest saved |
|---|---|---|---|---|
| $250,000 | $2,076.03 | $1,580.17 | $495.86 | $195,177 |
| $400,000 | $3,321.64 | $2,528.27 | $793.37 | $312,283 |
| $600,000 | $4,982.46 | $3,792.41 | $1,190.05 | $468,424 |
Two things drive that gap: fifteen fewer years of interest, and a rate that is usually lower on the 15-year. Both shrink the balance faster, which is also why the 30-year loan still has $290,237 outstanding at year 15 — the point at which the 15-year borrower is done.
What the break-even return really tells you
Paying off a mortgage early is a guaranteed return equal to the mortgage rate. The market alternative is not guaranteed. So the decision is not "7% versus my mortgage rate" — it is whether you expect to beat 7.8% reliably, after tax, for thirty years:
- Below the break-even rate, the 15-year wins outright. Lower risk, lower lifetime cost, and a paid-off house long before the 30-year borrower is halfway through.
- Above it, the 30-year wins on paper — but only if you actually invest the difference every month instead of absorbing it into spending. Skip the investing and the 15-year wins at every rate.
- Liquidity is not free. The extra $793.37 a month is real money you cannot spend in a bad year. A 30-year payment with voluntary extra principal keeps that flexibility and costs only slightly more.
- Taxes tilt it. Investment gains are taxable in a brokerage account; avoided mortgage interest is not. That pushes the break-even rate higher than the raw number.
Common mistakes
- Comparing monthly payments instead of total cost. The 30-year always looks cheaper per month because it spreads the same principal over twice as many payments.
- Assuming the rate gap is fixed. Quote both. A narrow gap makes the 30-year more competitive; a wide one makes the 15-year hard to beat.
- Ignoring how long you will stay. If you will move in five years, neither loan reaches the horizon where the interest gap compounds.
- Forgetting PMI. A smaller down payment on the 15-year can still carry mortgage insurance early on; check the PMI calculator for what that adds.
How to use this calculator
- Enter the loan amount — the financed principal, not the home price.
- Enter both quoted rates. Lenders price 15-year money separately, so do not reuse one number for both.
- Enter the return you realistically expect on investments, not a best case.
- Read the interest saved, then the break-even return: if your expected return is below it, the 15-year is the better bet.
- Open the return table to see how the winner flips between 7% and 8%.
Frequently asked questions
Is a 15-year mortgage always cheaper overall?
Yes on total interest, as long as its rate is not higher than the 30-year rate. You borrow the same principal for half as long at a rate that is typically lower, so the interest total is always smaller — the question is whether the higher payment suits your cash flow.
How much more is the monthly payment?
On $400,000 at 6.5% versus 5.75% the difference is $793.37 a month. That figure scales with the loan: about $496 a month on $250,000 and about $1,190 on $600,000 with the same rates.
When does the 30-year make more sense?
When you can reliably earn more than the break-even return on the difference — 7.8% in the default example — or when the lower required payment lets you keep cash for higher-interest debt, a business, or an emergency fund you do not otherwise have.
Does the break-even return depend on the loan amount?
No. Both plans scale with the loan, so the return at which they tie depends only on the two rates and the terms. Doubling the loan doubles both portfolios but leaves the break-even rate at 7.8%.
Can I get the same effect with a 30-year loan?
Close to it. Taking the 30-year and voluntarily paying the 15-year amount each month reaches nearly the same payoff date, keeps the lower required payment as a safety valve, and costs slightly more in interest because of the higher rate.
Should I refinance into a 15-year instead?
Only if the numbers justify the closing costs. The refinance calculator compares your current loan with a new one and shows the break-even point; the amortization schedule calculator shows either loan month by month.
Data sources: Payments use the standard amortizing loan formula on the quoted rates; the comparison invests the monthly difference as an ordinary annuity at your stated return, with monthly compounding. Taxes on investment gains, closing costs, PMI and future refinancing are not modeled, and the market return is an assumption you supply — the interest avoided by the 15-year loan is the only guaranteed figure here. Property taxes and insurance are excluded because they are identical on both terms. All calculations run in your browser. For a month-by-month view of either loan, see the amortization schedule calculator; to see what extra payments do to a loan you already have, use the mortgage payoff calculator.