15-Year vs 30-Year Mortgage: Which Saves More?
Clear, data-driven comparison of 15-year and 30-year mortgages. Calculate total interest, monthly payment differences, and choose the best term for your situation.
Built to pair with EverydayBudd's Mortgage Calculator, Refinance, and Affordability tools.
Introduction
Choosing between a 15-year and a 30-year loan changes everything—your monthly payment, interest cost, time to build equity, and even your emergency-fund risk. This guide gives you a simple, data-driven method to compare both terms (with realistic taxes/insurance/PMI), plus a worked example you can copy into the calculator.
15-year loans usually save the most interest and build equity fast, but 30-year loans maximize flexibility. The best choice depends on payment comfort, time in the home, rate difference, and whether you'll invest or prepay with the monthly savings.
Understanding the Basics
Key Terms Explained
- Principal & Interest (P&I): The base mortgage payment.
- APR vs Rate: APR includes most lender fees/points; use APR for apples-to-apples comparisons.
- Term: 15y (higher payment, much less interest) vs 30y (lower payment, more interest).
- Amortization: How each payment splits between interest and principal over time.
- PMI vs MIP: Conventional PMI (removable around 80–78% LTV), FHA MIP (different rules; often requires refi to remove).
- Points & Credits: Up-front cost to buy a lower rate, or lender credit to reduce closing cash.
- DTI (Debt-to-Income): Qualifying ratio; a 15-year payment can push DTI higher.
Step-by-Step Guide
Follow these steps in the EverydayBudd Mortgage Calculator for precise, side-by-side comparisons.
Step 1 — Gather inputs
Home price, down payment %, loan type (Conventional/FHA/VA/USDA). Rates for 15y and 30y. Property taxes, insurance, HOA, PMI/MIP.
Step 2 — Compute monthly payments
Enter both terms; note P&I and Total Monthly (PITI+HOA). Check how each fits your budget and emergency-fund cushion.
Step 3 — Compare lifetime cost & equity
Review total interest paid, amortization speed, and payoff date difference.
Step 4 — Model "invest-the-difference" vs "prepay"
If the 30y payment is lower, will you invest the savings or add it to principal? The calculator shows payoff time if you prepay a fixed extra amount.
Step 5 — Include PMI/MIP timelines
15y builds equity faster → earlier PMI removal on conventional loans. FHA rules differ; consider refi → conventional when eligible.
Step 6 — Run sensitivity tests
±0.25% rate changes, different down payments, points vs credits, biweekly vs monthly payments.
Step 7 — Decide with a scorecard
Payment comfort (cash-flow risk), total interest savings, time in home, qualifying DTI, likelihood you'll actually invest or prepay.
A Quick, Realistic Example (copy to the calculator)
Assumptions: $300,000 loan, 6.5% (30y) vs 6.0% (15y).
- Monthly P&I ≈ $1,896
- Total interest ≈ $382,633
- Balance after 15 years ≈ $217,677 still owed
- Monthly P&I ≈ $2,532
- Total interest ≈ $155,683
- Paid off in 15 years
Interest saved by choosing 15y: ≈ $226,951. If you chose the 30y and invested the ≈$635/month difference at 6% for 15 years, you'd have ≈ $184,800— but you'd still owe ≈ $217,700 on the mortgage. That's why the 15y often wins on pure math; the 30y wins on flexibility.
Tip: Paying the 30y loan at the 15y payment would retire it in ~15.8 years at this rate—slower because the 30y rate is higher.
Compare Your Terms Side-by-Side
Price 15y vs 30y with taxes, insurance, PMI/MIP, and points—then save your scenario.
Advanced Strategies
- 30y payment, 15y speed: Take the 30y for flexibility, then set auto-prepay to the 15y amount.
- Biweekly acceleration: The equivalent of 13 monthly payments/year can cut a 30y to ~24–25 years (rate-dependent).
- Points break-even: Buy points only if you'll keep the loan beyond break-even months (points ÷ monthly savings).
- Refi playbook: If rates drop or you gain equity, refi 30→15 for a lower rate and faster payoff.
- PMI removal planning (conventional): Prepay to hit 80% LTV sooner; lenders auto-terminate around 78% on schedule.
- Cash-flow first: If a 15y strains your budget or slashes your emergency fund, favor a 30y with disciplined prepayments.
- Tax angle: Bigger 30y interest doesn't always mean bigger tax savings due to the standard deduction and SALT caps—model both ways.
Common Mistakes to Avoid
- Picking by rate alone instead of total payment, total interest, and risk.
- Forgetting taxes/insurance/HOA in affordability.
- Buying points without calculating break-even.
- Assuming no PMI without 20% down or understanding removal rules.
- Choosing a 15y that kills your emergency fund (cash-flow risk > interest savings).
- Not stress-testing job change or childcare costs against a higher 15y payment.
Frequently Asked Questions
Frequently Asked Questions
Conclusion & Next Steps
You don't need guesswork—just a consistent method.
Action Items
- Price both terms in the Mortgage Calculator with real tax/insurance/PMI numbers.
- Compare total interest, equity timeline, and cash-flow risk.
- If flexibility matters, choose 30y + auto-prepay. If math and speed win, choose 15y.
- Re-run your model before locking and again if rates move or your offer changes.
Related Tools & Guides
Pick the Right Term with Confidence
Run your numbers, stress-test scenarios, and lock the loan that fits your goals.
References
- Consumer Financial Protection Bureau (CFPB): Choosing a mortgage, points vs credits, payment strategies
- Federal Housing Administration (HUD/FHA): MIP rules and program details
- Federal Housing Finance Agency (FHFA): Conforming standards and loan limits
- Department of Veterans Affairs (VA): VA loan guidelines and funding fees
- Homeowners Protection Act (HPA): PMI cancellation and termination standards