The 30-year fixed mortgage is the default for most American home buyers, but a 15-year loan can save you a fortune in interest. The catch is a much bigger monthly payment. Here's how to compare them properly.
Try the calculatorMortgage CalculatorMonthly payment with tax, insurance & PMI→The numbers on a $320,000 loan
That's a $400,000 home with 20% down. 15-year loans usually come with a lower interest rate than 30-year loans, so we compare a typical pair of rates:
| 30-year at 6.5% | 15-year at 6.0% | |
|---|---|---|
| Monthly principal and interest | $2,023 | $2,700 |
| Total interest paid | about $408,000 | about $166,000 |
| Interest saved with the 15-year | about $242,000 |
The 15-year payment is about $677 a month higher, but you own your home 15 years sooner and pay less than half the interest. Property tax and insurance are the same either way.
The middle road: a 30-year loan with extra payments
If you take the 30-year loan but pay an extra $678 a month (bringing it up to the 15-year payment):
- The loan is paid off in about 15.9 years.
- Total interest is about $193,000 — close to the 15-year loan.
- If money gets tight, you can stop the extra payments and fall back to the lower $2,023.
Even a small extra payment helps. Adding just $200 a month to the 30-year loan pays it off in about 23.4 years and saves about $105,000 in interest.
Try the calculatorLoan Prepayment CalculatorInterest saved by paying early→Choose the 15-year mortgage if…
- The higher payment still keeps your housing costs around 28% of gross income or less.
- You already have an emergency fund and are saving for retirement.
- You want to be mortgage-free before retiring or before the kids go to college.
- You value guaranteed savings over flexibility.
Choose the 30-year mortgage if…
- You need the lower payment to afford the home comfortably.
- Your income is irregular (commissions, self-employment).
- You'd rather invest the difference — for example to get your full 401(k) employer match first.
- You want the option to pay extra without being locked into it.
Questions to ask your lender
- What's the rate difference between the 15- and 30-year loans today?
- Are there prepayment penalties? (Most standard mortgages don't have them, but check.)
- If I pay extra, will it be applied to principal? Always ask for this in writing.
- What are the closing costs for each option?
Plug your own price, rate and term into the mortgage calculator to see the full monthly payment, including tax, insurance and PMI.
This article is general information, not personal financial, tax or legal advice. Rules and rates change — check the latest figures with an official source or a qualified adviser. Read our disclaimer.