The choice between a 15-year and 30-year mortgage is the single most consequential financial decision in a home purchase after the purchase price itself. On a $300,000 loan, the wrong choice costs over $200,000 in additional interest. This analysis provides the exact numbers with no lead capture and no lender referral fees.
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Based on $300,000 loan amount. 15-year at 6.25%, 30-year at 6.75%.
15-Year
$2,573/mo
at 6.25% interest rate
30-Year
$1,946/mo
at 6.75% interest rate
Key Figures
The 15-year mortgage delivers lower total cost through two simultaneous mechanisms. First, the shorter amortization period means each payment retires principal faster, reducing the balance on which interest accrues. Second, lenders price 15-year loans 0.50% to 0.75% lower than 30-year products because the shorter duration reduces their exposure to interest rate risk and default probability.
These two factors compound. A borrower who selects a 15-year loan at 6.25% instead of a 30-year at 6.75% saves on both the rate and the amortization curve simultaneously, producing interest savings that often exceed the original principal balance.
The strongest financial argument for the 30-year mortgage is capital allocation. The monthly payment difference of approximately $627 can be invested rather than paid to a lender. At an 8% average annual return in a diversified index fund, $627 per month over 15 years grows to approximately $218,000 — approaching the $237,420 in interest savings from the 15-year loan.
The 30-year wins if investment returns exceed the mortgage rate consistently. The 15-year wins when investment discipline cannot be guaranteed or when the borrower values the guaranteed return of debt elimination over probabilistic market returns.
15-Year is optimal when:
30-Year is optimal when:
Adding $400 per month in principal payments to a $300,000 30-year loan at 6.75% reduces the payoff timeline from 360 months to approximately 222 months and saves approximately $147,000 in interest. This does not match the full savings of a 15-year loan at the lower rate, but provides the flexibility to revert to minimum payments during financial stress.
How much more interest do you pay on a 30-year vs 15-year mortgage?
On a $300,000 loan at 6.75%, a 30-year mortgage costs approximately $400,000 in total interest. A 15-year at 6.25% costs approximately $163,000. The difference is roughly $237,000 — nearly the entire original loan amount paid again in interest.
Is a 15-year mortgage always better than a 30-year?
Not always. If the monthly payment difference is invested consistently in index funds, the 30-year borrower can sometimes accumulate comparable wealth. The optimal choice depends on income stability and investment discipline.
What is the interest rate difference between 15-year and 30-year mortgages?
Historically, 15-year mortgage rates run 0.5% to 0.75% lower than 30-year rates. This compounds the savings from the shorter term, making the 15-year significantly cheaper in total cost.
Can I pay off a 30-year mortgage in 15 years?
Yes, through additional principal payments. However, you pay the 30-year rate rather than the lower 15-year rate on the outstanding balance, reducing total savings compared to originating a 15-year loan from the start.
Which mortgage term is better for investment properties?
Most investors prefer 30-year loans on rental properties to maximize monthly cash flow and improve cash-on-cash return. Mortgage interest on investment properties is also tax-deductible.
Figures on this page use illustrative interest rates and are for educational purposes only. Actual rates vary by lender, credit score, and market conditions. Truly Free Mortgage Calculator does not collect personal data and does not connect users with lenders.