15-Year vs 30-Year Mortgage: Which Saves More?
On paper, the 15-year mortgage looks like a runaway winner: half the interest, a guaranteed payoff date, and a lower rate to boot. But the right answer depends on your savings rate, your tax situation, and how much liquidity you want. Here’s the comparison most blog posts gloss over.
Side-by-side: a $400,000 loan
Let’s run the same loan amount through both terms at typical 2026 rates, with the 15-year priced about 0.5% lower than the 30-year (roughly the historical spread):
| 30-year fixed | 15-year fixed | |
|---|---|---|
| Loan amount | $400,000 | $400,000 |
| Interest rate | 6.5% | 6.0% |
| Monthly P&I | $2,528 | $3,375 |
| Total interest paid | $510,178 | $207,571 |
| Total of all payments | $910,178 | $607,571 |
The 15-year saves about $302,000 in interest over the life of the loan and finishes the loan 15 years sooner. The trade-off is a payment that is roughly $847/month higher.
The case for the 15-year
- Massive interest savings. Cutting the loan term in half does not double the payment because more of each payment goes to principal from day one.
- Lower rate. 15-year mortgages typically price 0.25%–0.75% below 30-year rates, which compounds the savings.
- Forced equity-building. You can’t skip principal paydown the way you can with a 30-year loan you “intended” to pay off early.
- Defined finish line. Knowing you will be mortgage-free at age 50 instead of 65 is a meaningful psychological asset, especially if you plan to retire early.
The case for the 30-year (the part most people miss)
Here’s the argument the 15-year crowd tends to skip: with a 30-year loan, you can choose to invest the difference. If your mortgage rate is 6.5% and you reasonably expect a diversified portfolio to return 7–8% over decades, investing the extra $847/month from the example above can build more wealth than the interest saved by the 15-year.
The 30-year also gives you something the 15-year cannot: flexibility. If you lose your job, get sick, or face an emergency, the lower 30-year payment is mandatory and the larger margin you would have used to pay down a 15-year is yours to keep. Liquidity has real value in a downside scenario, even though it costs you in the average case.
The real decision tree
Pick the 15-year if all of the following are true:
- The 15-year payment fits comfortably (housing < 25% of gross income, ideally less).
- You already have a healthy emergency fund (6+ months of expenses) and you contribute to retirement up to at least your employer match.
- You aren’t carrying high-interest debt elsewhere (credit cards, personal loans).
- You won’t need the cash flexibility for a major life change in the next 5 years.
Pick the 30-year if any of these apply:
- The 15-year payment crowds out retirement contributions or stretches your budget.
- You’re self-employed, in a volatile industry, or your income is variable.
- You have other higher-rate debt to clear first.
- You expect to move or refinance within ~7 years anyway, in which case the interest-savings argument largely evaporates.
The third option: a 30-year you treat like a 20-year
A pragmatic compromise is to take the 30-year loan and voluntarily make extra principal payments — say, an extra $300–$500 a month — that effectively turn it into a 20-year loan. You give up a little of the 15-year’s lower rate, but you keep the right to skip those extra payments in a tough month. For most households, this is the better balance.
On a $400,000 loan at 6.5%, adding $400/month to the principal payoff cuts the loan term to about 21 years and saves roughly $171,000 in interest, while still giving you a $2,528 minimum payment if you ever need to fall back to it.
What the spreadsheet doesn’t capture
Two non-financial considerations that often tip the decision:
- Behavioral discipline. Many people who say they’ll “invest the difference” with a 30-year do not. The 15-year forces the saving.
- Marginal happiness of being debt-free. The peace of mind from owning your home outright is real, even if it isn’t on the spreadsheet.
Try both in our calculator
Plug your loan amount, both rates, and the two terms into our mortgage calculator to see your exact monthly payment, amortization schedule, and total interest under each option. The “extra payment” field also lets you simulate the 30-year-treated-like-a-20-year strategy in seconds.
Curious whether refinancing into a 15-year makes sense from your current loan? Read our refinance break-even guide next.