15-Year vs. 30-Year Mortgage: Calculate the Best Loan
Quick Answer
Consider getting a 15-year mortgage if you want to pay off your loan faster and pay less interest in the long run. But if you want a smaller monthly payment, opt for a 30-year mortgage.
Homebuyers can typically choose between two main types of home loans: a 15-year mortgage and a 30-year mortgage. A 15-year mortgage may be a good option if you want to pay off your loan faster and pay less interest in the long run. On the other hand, a 30-year mortgage may be appealing if you want a more affordable monthly payment. The right choice for you will depend on your financial situation and long-term goals. Here's what to know about each and which loan may be best for you.
15-Year vs. 30-Year Mortgage Comparison
If you're torn between a 15-year mortgage and a 30-year mortgage, look at the finer points to decide which one is more compatible with your finances.
| 15-Year Mortgage | 30-Year Mortgage | |
|---|---|---|
| Interest rate | Lower than a 30-year mortgage, on average | Typically higher than a 15-year mortgage |
| Total interest paid | You'll pay less interest over the life of the loan, likely saving you thousands | You can expect to pay more interest in the long term |
| Monthly payments | Larger monthly payments than a 30-year mortgage | More affordable monthly payments than a 15-year mortgage |
| Equity | You'll build home equity at a faster rate because more of your monthly payment will go toward the principal | It takes longer to accumulate equity in your home |
Mortgage calculator
15-Year vs. 30-Year Mortgage Calculator
Seeing the numbers in black and white might help clarify the right mortgage term for you. Let's say you're buying a home for $400,000 and make a 20% down payment. That means you'll need a home loan for $320,000.
Here's a side-by-side breakdown, assuming a 6.65% interest rate for a 30-year mortgage and a 5.89% rate for a 15-year mortgage.
| 15-Year Mortgage | 30-Year Mortgage | |
|---|---|---|
| Monthly payment* | $2,681.36 | $2,054.29 |
| Total interest paid | $162,645.10 | $419,543.53 |
| Total loan cost | $482,645.10 | $739,543.53 |
*Monthly payment includes principal and interest only. It does not include mortgage insurance, property taxes, homeowners insurance or homeowners' association (HOA) fees.
Learn more: Compare Current Mortgage Rates
Pros and Cons of a 15-Year Mortgage
This type of mortgage has benefits and drawbacks that are important to consider. They could help you decide on the right mortgage term for you.
Pros
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You'll pay off your loan faster. With a 15-year mortgage, you'll own your home outright in half the time it takes to pay off a 30-year mortgage. That's a big financial milestone—and you'll no longer have a mortgage payment.
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You'll pay less interest. In the example above, going with a 15-year mortgage would save you more than $256,800 over the life of the loan. That's a significant amount of money you could direct toward other financial goals.
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You'll establish home equity at a faster rate. A shorter loan term allows more of your monthly payment to go toward your principal balance, which will help you build home equity faster. This is the amount of your home's value you actually own.
Cons
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Your monthly payment will be higher. Let's go back to the example from earlier. In this case, your monthly payment would be roughly $627 higher with a 15-year mortgage. And that doesn't include other mortgage costs like private mortgage insurance, property taxes, homeowners insurance and homeowners association (HOA) fees.
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You may not qualify. Because of that larger monthly payment, it's typically harder to qualify for a 15-year mortgage. You'll have to meet your lender's eligibility requirements—and they'll want reassurance that you can afford it.
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It may impact your ability to reach other goals. A hefty mortgage payment could stretch your budget and create financial stress during your loan term.
When to Get a 15-Year Mortgage
A 15-year mortgage might be a great option if you have room in your budget for larger monthly payments and want to be mortgage-free sooner rather than later. Having a strong emergency fund can help you keep up with your loan payments if you run into a financial hiccup, whether that's a stretch of unemployment, a medical emergency or an unexpected home repair. Just be sure that your mortgage payment doesn't affect your ability to build your cash savings and set money aside for retirement.
Pros and Cons of a 30-Year Mortgage
A 30-year mortgage also comes with unique pros and cons. Understanding them can help you make an informed decision.
Pros
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You'll have a lower monthly payment. This is probably the biggest perk of a 30-year mortgage. A lower monthly payment can create breathing room in your budget and help prevent a missed mortgage payment.
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It could increase your buying power. A longer loan term translates to a smaller monthly payment—and that might make you eligible for a larger loan. That could be a game-changer in a competitive housing market.
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It can provide financial peace of mind. Your home serves as collateral for your mortgage, which means you could lose your home if you default on your payments. A lower monthly payment can reduce that likelihood and ease your fears.
Cons
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Your interest rate will be higher. From start to finish, you'll pay more interest with a 30-year mortgage. In the example above, that worked out to hundreds of thousands of dollars.
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It takes longer to build equity. If you have significant home equity, and your home increases in value, you could be in for a nice payday when you eventually sell. Before then, you'll also have the option to take out a home equity loan or line of credit.
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You'll make mortgage payments for a longer period of time. It will ultimately take longer to pay off your mortgage. That means you'll have a loan payment for three decades, assuming you don't refinance.
When to Get a 30-Year Mortgage
A 30-year mortgage might make sense if you don't want to be on the hook for a large monthly payment. That can reduce stress and make it easier to pay down debt, build your cash savings and shore up your retirement nest egg. If your mortgage doesn't have a prepayment penalty, you could make extra loan payments whenever it feels right to do so—without the pressure. Down the line, you can consider refinancing or recasting your mortgage.
Learn more: How to Pay Off Your Mortgage Early
The Bottom Line
When choosing a mortgage, your loan term will affect your monthly payment and how much interest you ultimately pay. A 15-year mortgage might make more financial sense in the long run, but a 30-year mortgage can allow for more affordable monthly payments. You'll want to consider the pros and cons of both before finalizing your home loan.
No matter the loan term, having a strong credit score can help you qualify for the best mortgage rates. You can get your credit report and FICO® Score☉ for free from Experian.
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About the author
Marianne Hayes
Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.
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