On a $400,000 loan at this week’s average rates, a 15-year mortgage costs about $766 more per month than a 30-year. Over the life of the loan, it saves roughly $360,000 in interest. Both numbers are correct, and they pull in opposite directions. That is why this decision is harder than it looks.
| $400,000 Loan | 30-Year Fixed | 15-Year Fixed |
|---|---|---|
| Rate (Freddie Mac, week of Oct. 8, 2026) | 7.40% | 6.73% |
| Monthly principal and interest | $2,769.52 | $3,535.20 |
| Balance after 5 years | $378,092 | $308,155 |
| Balance after 10 years | $346,411 | $179,689 |
| Total interest paid | $597,027 | $236,337 |
The payment figures cover principal and interest only. Property tax, homeowners insurance, and any PMI come on top and are the same whichever term you choose. Our Mortgage Calculator adds them in if you want the full monthly figure.
Why the 15-Year Saves So Much
Two things work in the shorter loan’s favor at once.
The first is the lower rate. Lenders price 15-year loans lower because their money is at risk for half as long. The spread between the two terms has been running around 0.6 to 0.7 percentage points through 2026.
The second matters more: you owe the money for half as long. In the very first month, the 30-year borrower pays $2,466.67 in interest and only $302.85 toward the balance. The 15-year borrower pays $2,243.33 in interest and $1,291.87 toward principal, more than four times as much. That gap compounds month after month. Ten years in, the 30-year borrower still owes $346,411 on a $400,000 loan, while the 15-year borrower is down to $179,689.
If you want to see that split payment by payment, our guide to reading an amortization schedule walks through it.
What the Higher Payment Costs You
The extra $766 a month is real money, and it shows up in two places.
It changes how much house you qualify for
Lenders typically want your housing payment below about 28% of gross income. Counting principal and interest alone, the 30-year payment above fits on an income of roughly $119,000. The 15-year payment needs about $152,000. Add taxes and insurance, and plenty of buyers who can afford the 30-year on this loan simply can’t qualify for the 15-year. Our article on how much house you can afford covers the full set of lender ratios.
It locks up cash you might need
A higher required payment leaves less room in the budget when something goes wrong. Equity in your house is not easy to get back out: you need a refinance, a HELOC, or a sale, and none of those are quick or free when money is tight. A homeowner with a 15-year mortgage and a thin emergency fund is in a more fragile position than one with a 30-year loan and six months of savings.
Compare 15- and 30-Year Quotes Side by Side
The spread between terms varies by lender, and the gap you are offered can change the math above. The Mortgage Research Center connects you with lenders so you can compare real rates for both terms before you commit.
The “Invest the Difference” Argument at Today’s Rates
The classic case for the 30-year goes like this: take the lower payment, invest the $766 you save each month, and the investments will outgrow the interest you pay. When mortgage rates were 3%, that argument was easy to win. At 7.4%, the math is much tighter.
Here is the comparison at the 15-year mark, when the 15-year borrower makes the final payment:
| Return on Invested $766/Month | Portfolio After 15 Years | 30-Year Balance Still Owed | Net Position vs. 15-Year |
|---|---|---|---|
| 5% | $204,659 | $300,597 | −$95,938 |
| 7% | $242,693 | $300,597 | −$57,904 |
| 9% | $289,740 | $300,597 | −$10,857 |
The investor needs an average return of about 9.4% a year just to break even, and that is before taxes on the investment gains if the money sits in a taxable account. Stocks have produced returns in that range over some long stretches, but nobody can promise it over a specific 15 years, while the 0.67-point rate savings and the shorter payoff on the 15-year are certain.
The picture shifts if the extra money goes somewhere with a tax advantage or an employer match. A 401(k) match is an immediate 50% or 100% return, which no mortgage payoff can compete with. Our framework on paying off debt vs. investing covers that ordering in detail.
The invest-the-difference strategy only works if the difference really gets invested, every month, for 15 years. In practice, a lower payment often turns into a bigger lifestyle. The 15-year mortgage forces the savings to happen. For some people, that structure is worth more than any spreadsheet comparison.
The Middle Path: A 30-Year Loan Paid Like a Shorter One
You can take the 30-year mortgage and pay extra toward principal whenever you choose. This keeps the low required payment as a safety net while capturing much of the savings.
- Pay the 15-year amount on the 30-year loan ($3,535 a month): the loan is gone in 16 years and 3 months, with about $288,000 in total interest. That is roughly $52,000 more than the 15-year loan, because the rate is higher, but $309,000 less than paying the 30-year on schedule.
- Add a flat $300 a month: payoff drops to 22 years and 1 month, and total interest falls to about $412,700, a savings of roughly $184,000.
The extra $52,000 compared with a true 15-year loan is the price of flexibility. If your income is variable or you are still building savings, that can be a reasonable premium to pay. Before choosing this route, confirm your loan has no prepayment penalty, and when you send extra, make sure the servicer applies it to principal.
How to Choose
The 15-year mortgage usually makes the most sense when:
- The higher payment stays under about 25% of your take-home pay.
- You already have a full emergency fund and you are capturing any employer retirement match.
- You want the house paid off by a specific date, such as before retirement or before kids reach college.
- You plan to stay long enough for the faster equity build to matter.
The 30-year is usually the better fit when:
- The 15-year payment would push your budget or your lender’s ratios to the limit.
- Your income is irregular, such as commission or self-employment income.
- You have higher-rate debt to pay off first, or retirement accounts you are not yet funding.
- You expect to sell or refinance within a few years, so the long-run interest totals will never fully play out.
If rates fall meaningfully after you buy, either loan can be refinanced. A 30-year borrower can also refinance into a 15-year later, once income has grown into the larger payment. Our Refinance Calculator shows the break-even point on that move.
Average rates: Freddie Mac Primary Mortgage Market Survey, week of October 8, 2026. Payment, balance, and investment figures were calculated by the InterestCalculators.net editorial team using standard amortization formulas with monthly compounding. Rates change weekly; run your own quote through the Mortgage Calculator.