Guide · Loan terms

15-year vs. 30-year: the real trade-off.

Run the same loan through both terms and the interest difference is startling. Borrow $400,000 at 6.5% for 30 years and you'll pay roughly $510,000 in interest — more than the house. The same loan over 15 years at the same rate costs about $227,000 in interest. And in practice 15-year loans usually carry a lower rate — often half a percentage point or more — which widens the gap further.

So why doesn't everyone take the 15? Because the interest line isn't the whole ledger. The 15-year payment on that loan runs around $1,000/month higher, and that difference is a commitment, not a choice. That's the real trade-off.

What each term is actually buying

The 15-year buys discipline and a discount. The lower rate is real money, the forced principal paydown builds equity fast, and the loan is simply gone in half the time — often timed nicely against retirement or college years. If your income comfortably covers the payment with room to spare, it's hard to beat on pure numbers.

The 30-year buys flexibility. The lower required payment is insurance against everything a fifteen-year stretch can contain: a job loss, a medical year, a child, a business opportunity. You can always pay a 30 like a 15; you can never pay a 15 like a 30. When something goes wrong, the loan that demands less is the loan that bends instead of breaking.

The third option most people miss: take the 30-year for its flexibility, then voluntarily pay the 15-year payment amount as long as life allows. You give up the 15's rate discount, but you keep an escape hatch — in a hard month, you drop back to the required payment with no penalty and no phone call. Model it on the calculator: set a 30-year term, then put the payment difference in the extra-per-month field and watch the payoff date.

How to actually decide

Start with the payment stress test. Take the 15-year payment plus taxes and insurance, and ask whether you could still cover it in your realistically bad year — one income instead of two, or a lean stretch of self-employment. If the answer is no, the decision is made: the 30 (paid aggressively when times are good) gives you most of the benefit without the fragility.

Then check the competition for that money. The extra $1,000/month locked into a 15-year payment is $1,000 not going to retirement accounts, an emergency fund, or higher-interest debt. A guaranteed return equal to your mortgage rate is good; an employer match or a 24% credit card payoff is better. The extra payments guide walks through that ordering.

Finally, price both for real. Get Loan Estimates for both terms from the same lender on the same day, put your actual numbers through the calculator for each, and set the two total-interest figures side by side. The right answer is personal, but it should be made looking at your own schedule — not a rule of thumb.

One warning about "affording more house"

The 30-year's lower payment is sometimes used not for flexibility but to stretch into a bigger loan. That's the one use that reliably backfires: it converts the 30's safety margin into extra debt, leaving you with the long term and the tight budget. If you need the 30-year payment to qualify at all, the honest signal is usually about the price, not the term — the affordability worksheet shows where the ratios put you.

This guide is general information, not financial advice. Rates, figures, and rate spreads vary with the market — get current quotes and run your own numbers before choosing a term.