Run it on your own numbers
Mortgage Calculator
Compare terms and rates on your own balance, then switch to affordability mode to see what each term does to the price you can reach.
Open the mortgage calculatorThe two terms side by side
Assumptions: a $400,000 loan, 6.5% on the 30-year and 5.9% on the 15-year — shorter terms usually price lower — principal and interest only, no tax or insurance.
| 30-year at 6.5% | 15-year at 5.9% | |
|---|---|---|
| Monthly payment | $2,528 | $3,354 |
| Total paid | about $910,000 | about $604,000 |
| Total interest | about $510,000 | about $204,000 |
| Extra per month | — | about $826 |
| Interest saved | — | about $306,000 |
The 15-year term is not a small optimisation. It removes more than half the interest cost of the loan. Whether you can carry it is a separate question.
What the shorter term costs you
- Affordability. The higher payment cuts the price you can qualify for — often by 25% or more on the same income. Test it with the affordability mode of the mortgage calculator.
- Flexibility. The payment is contractual. On a 30-year, an extra $826 a month is voluntary and can be paused if income drops.
- Competing uses of cash. Retirement contributions, an emergency fund, or a business may have a better claim on that $826 than 5.9% guaranteed interest saved.
The option most buyers miss
You can take the 30-year and pay it like a 15-year. Adding $826 a month to a $400,000 loan at 6.5% clears it in roughly 16 years and saves well over $250,000 in interest — a little less than the true 15-year, because the rate is higher, but with the payment optional every month.
The trade is precise: you give up the rate discount on the shorter term in exchange for the right to stop. Whether that is worth roughly half a point depends on how stable your income is. Model the extra-payment version with the extra-payment payoff calculator.
How to decide
- 1Check the 15-year payment against estimated net pay, not gross — use the take-home pay calculator if you are unsure.
- 2Add property tax, insurance and any HOA fee; the payment above is principal and interest only.
- 3Ask whether the higher payment would crowd out an emergency fund or employer-matched retirement contributions.
- 4If it is close, take the 30-year and set up the extra payment. You keep the option and most of the saving.
- 5If you plan to move within a few years, most of this matters less — the total-interest gap only materialises if you hold the loan.
Rates quoted here are illustrative. Use the actual rates you are offered for each term, because the spread between them is the whole argument.
Frequently asked questions
- Why is the 15-year rate usually lower?
- Lenders take on less duration and less risk over a shorter term, so shorter-term mortgages are typically priced below equivalent 30-year loans. The spread varies with market conditions.
- Is a 20-year mortgage a good compromise?
- It can be. The payment sits between the two and the rate usually does as well. Run your own balance on all three terms rather than assuming the middle is optimal.
- Does refinancing into a 15-year make sense later?
- It can, if rates and your income both cooperate, but refinancing has closing costs and resets amortisation. Compare the total remaining interest on your current loan against the new one before deciding.
Assumptions and limits
Every figure on this page comes from the assumptions stated beside it, calculated with the same formulas the linked tools use. Rates, taxes, insurance and running costs vary by lender, state and household, so substitute your own numbers before acting. Nothing here is a lending decision, a tax opinion, or financial advice.
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