15-Year vs. 30-Year Mortgage: How to Choose

Choosing between a 15-year and a 30-year mortgage looks like a choice between paying less overall and paying less each month. It is really a choice about what you do with the difference — and there is a third option, rarely presented as one, that captures most of the saving while keeping the flexibility. The numbers below use a $320,000 loan.

The two loans, side by side

Lenders price shorter terms lower, so the 15-year wins twice: a better rate, and half as long to accrue interest. At 6.5% over 30 years against 5.9% over 15:

• 30-year — $2,023 a month, about $408,100 of total interest.
• 15-year — $2,683 a month, about $163,000 of total interest.

The 15-year costs $660 more a month and saves about $245,200 over the life of the loan. Stated that way it looks unanswerable, which is why it is usually stated that way.

The third option

Take the 30-year loan and voluntarily pay the 15-year amount. That same $2,683 a month clears the 30-year loan in 16.1 years and costs about $195,800 of interest.

So the flexible route costs roughly $32,900 more than committing to the 15-year — about 13% of the headline saving, and the price of the higher rate. In exchange you keep the right to drop back to $2,023 in any month you need to, without refinancing, renegotiating, or explaining yourself to anyone.

That is the honest framing of the decision: not $245,200, but roughly $32,900 for an option you may never use and cannot buy any other way. Whether that is expensive depends entirely on how stable your income is.

What the 15-year is really buying

Beyond the interest, a shorter term does three things worth naming. Equity builds much faster, because a far larger share of each payment attacks principal from the first month — useful if you might sell or borrow against the house. The debt ends on a fixed date you can plan a retirement around. And it removes the discipline problem: an obligation is kept, while an intention to overpay frequently is not.

That last point is the strongest practical argument for the 15-year, and it is behavioural rather than financial. Anyone who knows the $660 would quietly become spending should treat the commitment as a feature.

What the 30-year is really buying

A lower required payment is not the same as a lower cost of living — it is room. That room can go to a 401(k) match you would otherwise miss, an emergency fund, childcare, or simply a lower debt-to-income ratio, which matters if you plan to borrow again.

It also matters for qualifying. Lenders underwrite the required payment, so the 30-year supports a larger loan at the same income. Buyers stretched by the 15-year payment sometimes discover the choice was never really open to them.

The tax argument is weaker than it used to be

“Keep the mortgage for the deduction” was reasonable advice when most homeowners itemised. Far fewer do now: the standard deduction is large enough that a typical borrower's mortgage interest, state taxes and charitable giving together do not exceed it, so the interest produces no tax benefit at all.

Even when you do itemise, the deduction returns your marginal rate on the interest — it never makes borrowing profitable. Paying a dollar of interest to avoid 24 cents of tax is still 76 cents gone. Check whether you actually itemise before letting the deduction influence a six-figure decision.

You can change your mind later — at a price

Nothing about the 30-year loan is permanent. If rates fall, refinancing into a 15-year term captures both the shorter schedule and the lower rate, and the years already paid are not wasted. The cost is closing costs of roughly 2–5% of the balance and a fresh amortisation schedule, which front-loads interest again.

This asymmetry matters when the decision feels close: choosing the 30-year leaves both doors open, while the 15-year commits you to a payment you cannot lower without refinancing. Ignore biweekly payment plans sold as a shortcut, though — paying half the mortgage every two weeks produces one extra payment a year, which you can arrange yourself for nothing rather than paying a servicer to set up.

The argument this guide will not settle for you

The standard objection to paying a mortgage down quickly is opportunity cost: money spent on a 5.9% loan is money not invested at a possibly higher return. The comparison is genuinely close, sensitive to your tax situation and the return you assume, and it depends on what actually happens to the freed-up cash rather than what you intend.

What is not close: capturing a full employer match beats extra mortgage payments in every plausible scenario, because nothing else returns 50–100% immediately. Clear that first, then argue about the mortgage.

How to decide

• Take the 15-year if the payment fits without crowding out retirement or an emergency fund, and you want the debt gone on a fixed date.
• Take the 30-year and overpay if your income varies, if you are self-employed, or if you would rather hold the option than the obligation.
• Take the 30-year and do not overpay if you have better uses for the money — but be honest that “better uses” means invested, not absorbed.

Run your own number

Compare both terms on your actual loan in the mortgage calculator, then watch how differently the principal falls in the amortization calculator. Price the third option — a 30-year paid faster — in the mortgage payoff calculator, and take the opportunity-cost question seriously in the mortgage vs invest calculator rather than settling it with an assumption.