How it works
The 15-versus-30-year decision is a race between guaranteed interest savings and uncertain investment returns, run on a monthly payment difference. The shorter term wins twice structurally: its balance amortizes twice as fast AND its rate typically prices 0.5–0.75 points lower, so on $360,000 the 15-year at 5.75% costs about $2,989 monthly against the 30-year's $2,240 — and repays roughly $268,000 less interest across its life. That saving has a price: $749 of monthly cash flow surrendered for fifteen years. The alternative strategy banks that difference into investments instead, and at a 7% long-run assumption the stash reaches roughly $243,000 by year fifteen — against a remaining 30-year balance near $264,000, leaving investing about $21,000 behind at that checkpoint despite the higher nominal accumulation. This calculator stages the full race year by year: both balances declining, cumulative interest diverging, and the invested-difference portfolio compounding alongside. Three truths survive every run of the numbers. The 30-year strategy only works if the difference is actually invested monthly — consumption quietly absorbs most real-world differences. Investment returns carry sequence risk the mortgage saving never does. And flexibility favors the 30-year structurally: paying it LIKE a 15-year reproduces most savings while preserving the right to stop.
Formula
Interest saved = interest(30yr) − interest(15yr) | Investing edge = FV(monthly difference, return, 15y) − balance(30yr at year 15)
Tips
- Take the 30 and auto-invest the difference ONLY with true automation.
- The 15-year's lower rate means you win even before acceleration begins.
- Guaranteed mortgage savings deserve a risk discount when comparing to equities.
- Refinancing into a 15 later captures the rate without the entry-level payment.
- Check affordability honestly: a 15-year payment should strain comfort, not solvency.
Frequently asked questions
- How much interest does a 15-year mortgage save over a 30-year?
- On $360,000 — 5.75% for fifteen years versus 6.35% for thirty — roughly $268,000: the 15-year pays about $178,000 of interest while the 30-year approaches $446,000 held to maturity. Lower rate plus doubled amortization speed produce the gap; neither factor requires heroic assumptions.
- Is it better to get a 15-year mortgage or invest the difference?
- At 7% assumed returns the difference grows to about $243,000 by year fifteen, trailing the 30-year's remaining $264,000 balance — close enough that risk preference decides. The mortgage saving is guaranteed; the portfolio is not. Disciplined investors narrow the gap, guaranteed-only households should favor the 15-year outright.
- What is the payment difference between 15 and 30 year mortgages?
- About $749 monthly on the default loan — $2,989 versus $2,240. Roughly two-thirds of that difference reflects faster principal repayment rather than rate, which is why the 15-year functions economically as forced high-speed saving: the extra dollars build equity rather than disappearing to interest.
- Can I pay off a 30-year mortgage like a 15-year?
- Yes — adding the payment difference as principal reproduces most of the interest savings while keeping the LOWER required payment as an option. The catch is behavioral: the bank enforces the 15-year schedule, while self-directed acceleration depends on a decade of consistent transfers that lifestyle pressure routinely dissolves.
- Do 15-year mortgages really have lower rates?
- Consistently yes, typically 0.5–0.75 points below comparable 30-year pricing, reflecting the lender's shorter exposure. On $360,000 that spread alone saves meaningful interest before any acceleration — it is why the 15-year's total-interest advantage compounds from two independent sources rather than speed alone.