Choosing a mortgage term is one of the biggest money decisions most households make. The two most popular options in the US are the 15-year and the 30-year fixed-rate mortgage. The trade-off is simple to state — a higher payment now versus a much larger interest bill later — but the right answer depends on your budget, goals and risk tolerance.
The numbers side by side
Here is a $320,000 loan (a $400,000 home with 20% down). Fifteen-year loans usually carry lower rates, so we assume 6.5% for 30 years and 5.9% for 15 years. Figures cover principal and interest only.
| 30-year at 6.5% | 15-year at 5.9% | |
|---|---|---|
| Monthly payment | $2,023 | $2,683 |
| Total interest | $408,142 | $162,955 |
| Balance after 10 years | $271,284 | $139,118 |
The 15-year loan costs about $660 more per month but saves roughly $245,000 in interest — and after ten years you would owe about half as much.
Why a 15-year mortgage saves so much
- Lower rate: lenders take less risk over a shorter term, so they usually charge less.
- Less time for interest to accrue: interest is charged on the outstanding balance every month, and the balance falls much faster.
- Faster equity: more of each payment goes to principal from day one.
Why many people still choose 30 years
- Affordability: the lower payment can make the difference between qualifying for a home or not.
- Flexibility: you can always pay extra on a 30-year loan, but you can't pay less on a 15-year one when money is tight.
- Opportunity cost: the monthly difference could fund retirement accounts that may earn more than your mortgage rate — especially with an employer match.
- Emergency cushion: a lower fixed cost makes it easier to build and keep an emergency fund.
A middle path: 30-year loan, 15-year habits
Some borrowers take a 30-year mortgage for safety, then voluntarily pay extra each month. You won't get the lower 15-year rate, but you keep the option to drop back to the minimum payment during a hard year. Use the extra-payment field in our loan amortization calculator to see how much time and interest this could save.
How to decide
- Make sure the 15-year payment — plus taxes, insurance and any PMI — stays within about 28% of gross income.
- Check that you'll still have three to six months of expenses saved after closing.
- Confirm you can keep contributing to retirement, at least enough to get any employer match.
- If all three are true, the 15-year loan is usually the cheaper choice. If not, a 30-year loan with optional extra payments is the safer one.
Run your own numbers with the full payment breakdown below.